<PAGE>   1


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(MARK ONE)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                  TO
                               ----------------    ------------------

                         COMMISSION FILE NUMBER 0-10621
                                                -------

                            AMERICAN ECO CORPORATION
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

         ONTARIO, CANADA                                          52-1742490
---------------------------------                            -------------------
   (State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                 154 UNIVERSITY AVENUE, TORONTO, ONTARIO M5H 3Y9
          ------------------------------------------------------------
          (Address of principal executive offices, including zip code)

                                 (416) 340-2727
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act.

                                              Name of each exchange on
     Title of each class                         which registered
     -------------------                      ------------------------
           None                                        None

Securities registered pursuant to Section 12(g) of the Act.

                           COMMON SHARES, NO PAR VALUE
                             SHAREHOLDER RIGHTS PLAN
                           ---------------------------
                                (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X  No
                                              ---    ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

     At January 31, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $18,534,572, and the number of Common
Shares outstanding of the Registrant was 21,960,394.

     Documents Incorporated in Reference: None



<PAGE>   2


                                    FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE

<S>                                                                                                              <C>
PART I
         Item 1.  Business......................................................................................  3
         Item 2.  Properties.................................................................................... 14
         Item 3.  Legal Proceedings............................................................................. 15
         Item 4.  Submission of Matters to a Vote of Security Holders........................................... 15

PART II
         Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters......................... 16
         Item 6.  Selected Financial Data....................................................................... 16
         Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations......... 17
         Item 8.  Financial Statements and Supplementary Data................................................... 23
         Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 53

PART III
         Item 10.  Directors and Executive Officers of the Registrant........................................... 54
         Item 11.  Executive Compensation....................................................................... 57
         Item 12.  Security Ownership of Certain Beneficial Owners and Management............................... 60
         Item 13.  Certain Relationships and Related Transactions............................................... 61

PART IV
         Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................. 63
</TABLE>



<PAGE>   3


                                     PART I

Unless otherwise indicated all dollar amounts are in United States dollars. For
a statement regarding forward looking statements contained herein, see "Item 7.
Management's Discussion and Analysis of Results of Operations and Financial
Condition - Information Regarding Forward Looking Statements."

ITEM 1. BUSINESS

GENERAL

     American Eco Corporation (the "Company" or "American Eco") through its
subsidiaries is a leading provider of industrial outsourcing which includes
specialty fabrication and environmental services to principally three industry
groups in the United States and Canada: (i) energy, (ii) pulp and paper and
(iii) power generation. The Company also provides construction management
services to a select group of commercial owners and developers. The Company
offers its customers outsourcing solutions for an extensive array of support
services such as equipment and facility repair, maintenance, refurbishment,
retrofit and expansion. The Company's specialty fabrication services include the
construction of decks, well jackets and modules for offshore oil and gas
platforms, the fabrication of piping, pressure vessels, boiler tube bundles, and
other equipment used in process industries, as well as the erection of
structural steel support systems. The Company also manufactures, sells, installs
and operates SAREX(R) oil filtration and separation systems worldwide. Its
environmental services include diversified waste recycling and other material
handling processes.

     The Company has strategically positioned itself as a consolidator of
outsourcing services, which can be performed by the Company with greater
efficiency, safety and cost-effectiveness. By outsourcing support services, the
Company's customers can focus on their core manufacturing processes, reduce
operating costs, improve safety and conserve human and capital resources.

     American Eco's business has benefited from several market trends. First is
the shift among industrial companies toward outsourcing maintenance and other
non-core services. Companies have increased their use of outside contractors to
control their internal labor and insurance costs and to eliminate the need for
maintaining expensive, under-utilized equipment. Second, the mounting costs of
training skilled employees, maintaining a satisfactory safety record and
complying with rapidly changing government regulations favors experienced
outsourcing providers. Third is a preference by customers to simplify vendor
management by working with larger, outsource providers which have broad
geographic coverage. These trends had driven American Eco's acquisition strategy
to consolidate regionally fragmented service providers in the United States and
Canada. American Eco has realized significant growth through acquiring companies
which provide services to several industries in different geographical regions.
The Company's strategy is to focus on its operating subsidiary's profitability
and future growth.

     American Eco believes it has achieved a competitively advantaged position
in the industrial outsourcing services, environmental services, and construction
management services markets it serves by consistently providing high-quality,
cost-effective services on a safe and timely basis. The Company's key
competitive strengths include: (i) long-standing customer relationships, (ii) an
outstanding safety and quality record, (iii) a broad offering of value-added
services and capabilities, (iv) the ability to provide its services in the
United States and Canada and (v) an experienced management team in the field and
at the corporate level. However, the Company is dependent upon the business
cycles of the industry groups to which it provides the outsourcing services.

     During 1999, the Company recorded certain asset impairment, litigation, and
other charges that management believes are not reflective of the Company's core
or on-going business activities and are viewed by management as non-recurring.
The total expense is $29.3 million and the major components are listed as
follows: 1) Write-off of UKstar note receivable $8.0 million; 2) capitalized
lease-hold improvements $0.5 million; 3) inventory write-down $0.5 million; 4)
litigation charges of $13.8 million including charges related to the
Petrodrill/Amethyst contract of $10.9 million, and a reserve placed for
settlement of the U.S. Attorney v. ACI proceeding (see Note 21 to the
Consolidated Financial Statements), 5) failed acquisition costs primarily
related to U.S. Industrial Services, Inc. ("USIS") of $1.0 million, and 6)
severance and miscellaneous other asset impairments of $5.5 million.

     During 1998, the Company recorded charges related primarily to certain
investments in Dominion Bridge Corporation ("Dominion Bridge") and certain of
its subsidiaries all of which filed under the Canadian Bankruptcy and Insolvency
Act in August 1998, to an impairment in its investment in USIS, and to severance
costs of $3.2 million relating primarily to changes in senior management
positions both at the corporate offices and at certain subsidiaries. In
addition, management recorded charges of $4.6 million related to certain single
project joint ventures during the fourth quarter which were not anticipated by
management or the joint ventures.

                                       3

<PAGE>   4


     Effective March 1, 1999, the Company acquired Protective Sealing, Inc.,
d/b/a Tony Crawford Construction ("Tony Crawford Construction"), as a division
of Specialty Management Group, Inc. As of December 1, 1999, the Company acquired
MidAtlantic Recycling Technologies, Inc., a provider of environmental services.

     In May 1999, Mr. Matthew D. Hill was promoted to Chief Operating Officer
from Senior Vice President of Operations. As of June 1, 1999, Michael Appling
Jr. became Chief Financial Officer. And in January 2000, Todd Quattlebaum joined
the Company as Vice President of Operations.

     In May 1999, the Company and its principal subsidiaries entered into a
Credit Agreement with General Electric Capital Corporation as lender and agent
for additional lenders. The Credit Agreement as amended provides for a
collateralized revolving credit facility (the "Revolver") of up to $30 million
to be used for working capital and other general corporate purposes and is based
upon certain eligible accounts receivable. The Revolver has a two-year term,
subject to two automatic one year extensions at the mutual discretion of the
Company and the lenders. Borrowings under the Revolver accrue interest at a rate
equal to 4% above the commercial paper rate. The revolver is collateralized by
the Company's accounts receivables, inventory, and most of the owned properties
are mortgaged as security.

     During fiscal year 1999, the Company strengthened its focus on its core
businesses by deciding to sell its engineering and switchgear businesses.

     At January 31, 2000, the Company operated primarily through the following
first and second tier wholly-owned subsidiaries: C.A. Turner Construction
Company, a Delaware corporation ("C.A. Turner" and, together with Action
Contract Services Inc., a Delaware corporation, the "Turner Group"); Lake
Charles Construction Company, a Louisiana corporation ("Lake Charles
Construction" and, together with its wholly-owned subsidiaries, the "Lake
Charles Group"); Industra Service Corporation, a British Columbia, Canada
corporation ("Industra Service"); MM Industra Limited, a Nova Scotia, Canada
corporation ("MM Industra"); United Eco Systems, Inc., a Delaware corporation
("United Eco"); Separation and Recovery Systems, Inc., a Nevada corporation
("SRS"); Chempower, Inc., an Ohio corporation ("Chempower"); Specialty
Management Group, Inc., d/b/a CCG, a Texas corporation ("CCG"), and MidAtlantic
Recycling Technologies, Inc., a Delaware corporation ("MART"). During 1999, the
Company also operated through its 82% owned subsidiary USIS.

BUSINESS STRATEGY

     The Company's objectives are to continue to strengthen and broaden its
position as a leading provider of industrial outsourcing services, environmental
services, and construction management services to the energy, pulp and paper,
power generation and retail industries in North America, and thereby, increase
cash flow and profitability. To achieve these objectives, the Company is
pursuing the following business strategies:

     Strengthen Competitive Position in Growing Outsourcing Market. Management
believes that participants in the energy, pulp and paper, power generation and
retail industries, in an effort to remain competitive, will continue to increase
their reliance on independent contractors to provide support and outsourcing
services. Management is expanding the Company's capabilities to provide its
customers an outsourcing solution for their support services and industrial
needs. As part of this strategy, the Company announced that it is going to seek
shareholder approval for a change of name to "Global Outsourcing Corporation" as
it is more descriptive of the Company's business.

     Cross-Sell Services. The sales staff, operations managers and business
development personnel of each of the Company's subsidiaries are familiar with
the capabilities of all the Company's subsidiaries. The Company trains its
personnel to identify cross-selling opportunities and integrate the breadth of
the Company's services into each bid proposal. This provides the customer a more
comprehensive portfolio of services. The Company's cross-selling initiatives
have resulted in several successful projects which have involved multiple
operating subsidiaries of the Company and the performance of services internally
which were historically performed by third parties.

     Maintain Decentralized Operating Structure. While at the corporate level
the Company retains centralized control over certain administrative and finance
functions, its operating subsidiaries maintain a high level of autonomy.
Management believes that the Company's decentralized operating structure is
critical to its success, as many decisions to purchase its services are made by
local customers based on established relationships and a service provider's
ability to respond rapidly to the customer's needs. In addition, the Company has
instituted programs to improve subsidiary reporting procedure and eliminate
functional redundancy.

                                       4

<PAGE>   5


     Acquire Complementary Service Businesses. The Company evaluates, on an
ongoing basis, potential acquisitions of complementary businesses in an effort
to further strengthen and broaden its outsourcing service offering, and to
expand its customer base and geographic presence. Management believes that the
industrial outsourcing services, environmental services, and construction
management services markets are fragmented markets which are entering a period
of consolidation due to: (i) customer demand for greater breadth and quality of
service, (ii) the need to service multiple customer facilities, thus enabling
the customer to reduce its vendor relationships, and (iii) the increased
importance of established safety and environmental compliance records. These
factors have increased the necessary economies of scale and scope in the support
services and specialty fabrication markets, eroded the competitiveness of
smaller industry participants, and increased the barriers to entry for new
competitors. The Company has only pursued selected acquisitions that complement
its existing business units during this fiscal year.

DEVELOPMENT OF THE BUSINESS

     The Company was organized under the laws of Ontario, Canada in 1969 and
entered the environmental business in 1987 under the name ECO Corporation.
Between 1987 and 1992, the Company developed and marketed certain environmental
technologies, including commercial and residential food waste composting
systems. The Company discontinued its composter operations, which resulted in
the eventual write-down or sale of substantially all of the assets associated
with such operations by 1993. Since 1993, the Company has entered its current
lines of business and has grown substantially through acquisitions of other
companies. In fiscal 1997, the Company sold its subsidiaries Eco Environmental
Inc. ("Eco Environmental") and Environmental Evolutions, Inc. ("Environmental
Evolutions") which significantly reduced the Company's involvement in asbestos
remediation services. In fiscal 1999, the Company strengthened its focus on its
core businesses by deciding to sell its engineering and switchgear businesses,
acquiring Tony Crawford Construction as a division of CCG, who provides
nationwide services as a retail finish-outsourcing contractor, and in December
1999, acquiring MART, a provider of environmental services.

ACQUISITIONS

     In November 1993, the Company purchased the operating assets and businesses
of the Turner Group, which is located in Port Arthur, Texas and provides
construction, maintenance, demolition, fabrication, and industrial outsourcing
services to petroleum and petrochemical refineries in the Southwest United
States. Management believes that as a result of the acquisition of the Turner
Group, the Company is well positioned to provide industrial outsourcing services
to the petroleum and petrochemical refining industry. The Turner Group has a
55-year operating history and is located in the region that has the largest
crude refinery capacities in the United States.

     In June 1994, the Company acquired Cambridge, a construction management
company located in Dallas, Texas which provides project management consulting
services to small contractors. At this time, Cambridge is not active.

     In July 1995, the Company acquired the Lake Charles Group, a construction
company located in Lake Charles, Louisiana. The Lake Charles Group commenced
operations in 1986 and provides general contracting, industrial outsourcing,
heating and air conditioning and industrial sheet metal services to commercial
and light industrial clients.

     Effective May 31, 1996, the Company acquired United Eco, a construction
company which is headquartered in High Point, North Carolina and provides
environmental contracting, remediation, waste water, ground contamination
treatment and recycling services to clients primarily in the eastern and
southeastern regions of the United States. United Eco operates two thermal
desorption treatment units.

     Effective July 1, 1996, the Company acquired SRS, which is based in Irvine,
California. SRS manufactures and distributes a proprietary line of SAREX(R) oil
filtration and separation systems. There are approximately 30,000 such systems
currently installed in one-half of the world's oil and petrochemical tankers as
well as in major oil refineries.

     Effective July 22, 1996, the Company acquired Industra Service, which is
based in Vancouver, British Columbia, Canada. Industra Service provides
industrial outsourcing services and speciality fabrication services to the pulp
and paper and petroleum and petrochemical refining industries principally in
western Canada and the northwestern United States.

     On September 3, 1996, the Company acquired certain assets of M & M
Manufacturing Limited Partnership of Dartmouth, Nova Scotia, which provided
pipefitting, assembling, machining and fabrication services to the petroleum and
petrochemical refining, power generation, forest products and offshore oil
exploration industries. The Company conducts the operations of M & M
Manufacturing Limited Partnership through MM Industra, which was formed for the
acquisition.

                                        5

<PAGE>   6


     On March 4, 1997, the Company completed its acquisition of Chempower, a
manufacturing, construction and environmental services company for the power
generation and chemical processing industries, headquartered in Canton, Ohio.

     On September 1, 1997, the Company acquired CCG, a provider of maintenance
and construction management services to commercial and retail clients throughout
Canada and the United States. CCG has developed a proprietary management
information software system.

     Effective November 30, 1998, the Company increased its ownership in USIS
from 21% to 82%. The USIS Common Stock is traded on the OTC Bulletin Board. In
November 1998, USIS sold the assets, subject to the related liabilities, of its
subsidiary J.L. Manta, Inc., and in December 1998, USIS sold the assets, subject
to the related liabilities, of its P.W. Stephens Residential Inc. subsidiary.
USIS is engaged in asbestos abatement and waste recycling through its
wholly-owned subsidiary P.W. Stephens Services, Inc. in the Midwest and
Northwest. In May 1998 following USIS' recapitalization, the Company held
certain promissory notes (the "Notes") of USIS consisting of outstanding
principal and interest in the aggregate amount of $18.9 million. The outstanding
amount of the Notes were reduced by $1 million, representing the purchase price
for 1,000,000 shares. The Notes were convertible into shares of USIS Common
Stock at a price equal to 85.0% of the five day weighted average price of such
shares immediately preceding the conversion date. As of July 24, 1998, the
Company sold the Notes to USIS Acquisition, L.L.C. (the "Holder"), an unrelated
entity, for $5.0 million in cash and a collateralized promissory note for $12.9
million payable on January 29, 1999. The Holder converted the Notes into
5,295,858 shares of USIS Common Stock, and collateralized its promissory note to
the Company with a pledge of the 5,295,858 shares. In November 1998, the Holder
advised the Company that the Holder would not be able to pay its note at
maturity, and the Company took ownership of the pledged shares in discharge of
the Holder's note. USIS is seeking strategic business opportunities or
acquisitions to enhance shareholder value.

     Effective March 1, 1999, the Company purchased Tony Crawford Construction,
as a division of CCG, which provides nationwide services as a retail
finish-outsourcing contractor.

     Effective December 1, 1999, the Company acquired all of the outstanding
shares of MART located in Vineland, New Jersey. MART is a fixed-based facility
that recycles refinery affuents, manufactured gas plant wastes, and other
process waste streams. In November 1997, the Company sold its 50% interest in
MART to George E. Phillips Holdings, Ltd. for cash and a note receivable
collateralized by 50% of the issued and outstanding shares of common stock of
MART. The acquisition was facilitated by calling the unpaid balance of the note
to obtain the 50% interest from George E. Phillips Holdings and the purchase of
the other 50% interest for cash and notes from an unrelated third party.

                                       6

<PAGE>   7


OVERVIEW OF BUSINESS AND GEOGRAPHICAL SEGMENTS

     The Company has pursued a strategy of becoming a consolidator of
outsourcing services to the energy, pulp & paper, power generations, and
construction management service industries in the United States and Canada.
Within this general line of business, the Company provides industrial
outsourcing, environmental, and construction management services.

     The following table provides information with respect to the Company's
principal business segments.

<TABLE>
<CAPTION>
                                         INDUSTRIAL                         CONSTRUCTION
                                         OUTSOURCING      ENVIRONMENTAL      MANAGEMENT
                                         SERVICES(1)       SERVICES(2)       SERVICES(3)
                                         ----------        ----------        ----------
                                                         (IN THOUSANDS)

<S>                                      <C>               <C>               <C>
FISCAL 1999
Revenue ..........................       $  171,619        $   33,322        $   53,136
Operating loss ...................          (23,831)           (2,689)           (4,990)
Depreciation and amortization ....            4,558               657               607
Capital expenditures .............            2,515               700               123

FISCAL 1998
Revenue ..........................       $  233,193        $   14,115        $   29,181
Operating loss ...................          (24,119)              (78)           (2,416)
Depreciation and amortization ....            3,565               569               590
Capital expenditures .............           10,066             1,456               272

FISCAL 1997
Revenue ..........................       $  144,904        $   38,757        $   10,496
Operating earnings ...............           11,732             7,114               256
Depreciation and amortization ....            3,664               964               410
Capital expenditures .............            1,677             1,408                49
</TABLE>

(1)  Specialty fabrication has been consolidated under the industrial
     outsourcing services sector. Revenues of Chempower were recognized
     commencing March 1, 1997.

(2)  The sale of Eco Environmental and Environmental Evolutions on August 31,
     1997 significantly reduced the operating results of the environmental
     services segment in 1998. Beginning December 1, 1998, the consolidation of
     USIS financials increased the activity of the environmental services
     segment during fiscal 1999. The following USIS subsidiaries were included
     for the time period indicated during fiscal 1999: P.W. Stephens
     Residential, Inc. - three months; Atnam, Inc. - two months; and P.W.
     Stephens Services, Inc. - twelve months.

(3)  Revenues from CCG were recognized commencing September 1, 1997 and revenues
     from Tony Crawford Construction were recognized commencing March 1, 1999.

                                       7

<PAGE>   8


     The following table provides information with respect to the geographic
segmentation of the Company's business.

<TABLE>
<CAPTION>
                                                  CANADA         UNITED STATES
                                                ----------       -------------
                                                       (In thousands)

<S>                                             <C>               <C>
FISCAL 1999
Revenue .................................       $   79,930        $  178,147
Operating loss ..........................          (10,095)          (21,415)
Depreciation and amortization ...........              880             4,942
Capital expenditures during the year ....            2,356               982

FISCAL 1998
Revenue .................................       $  123,056        $  153,433
Operating loss ..........................           (6,123)          (20,490)
Depreciation and amortization ...........              480             4,244
Capital expenditures during the year ....            9,160             2,634

FISCAL 1997
Revenue .................................       $   50,835        $  143,322
Operating earnings ......................            6,503            12,599
Depreciation and amortization ...........            1,223             3,815
Capital expenditures during the year ....              332             2,802
</TABLE>

PRINCIPAL INDUSTRIES SERVED BY THE COMPANY

     ENERGY

         The Company provides industrial outsourcing services including
specialty fabrication to the energy industry, with particular focus on (i)
petroleum refineries, (ii) petrochemical and chemical facilities and (iii) the
offshore oil and gas industry in North America.

         Petroleum Refineries. The typical petroleum refinery in North America
is an aging facility that must process crude oil at high utilization rates while
complying with stringent environmental regulations. High utilization rates
accelerate a facility's rate of deterioration and increase the need for repair
and maintenance work. The Company believes that any increase in U.S. refining
capacity is likely to require the refurbishment or expansion of existing
facilities due to the prohibitively high cost to construct new facilities. The
Company believes that plant managers increasingly hire independent contractors
to maintain the operability of refineries and have generally reduced their
internal maintenance personnel.

         Petroleum refiners repair and replace process equipment and piping
systems on an on-going basis in order to maintain the operability and efficiency
of their facilities, and to ensure that such facilities comply with current
safety and environmental regulations. Refinery maintenance projects vary in
scope from routine repairs to major capital improvements and turnarounds which
require the shutdown of certain operating units or the entire refinery. In
addition to routine maintenance, refiners periodically undertake capital
improvement projects to refurbish their facilities. Such projects can require
from six months to three years to complete depending upon the type, utilization
rate, and operating requirements of the particular refinery.

         In the Company's operating region along the U.S. Gulf Coast, there is
an aggregate of approximately 6.8 million barrels of crude oil distillation
capacity, which accounts for approximately 42% of total U.S. crude oil
distillation capacity.

         Petrochemical/Chemical. The petrochemical and chemical industries are
capital-intensive and heavily regulated. Continuous capital spending is
necessitated by the large plant sizes and economies of scale required to process
end-products efficiently, as well as the complex technology and sophisticated
safety and environmental equipment utilized in these facilities. High capital
costs represent significant barriers to entry in this industry, so any entry
into the industry or increase in capacity is likely to result from the expansion
or refurbishment of existing facilities due to the prohibitively high cost
associated with building a "grass-roots" facility. As such, when
petrochemical/chemical processors undertake significant facility modification
programs, they also typically expand the rated capacity of their facilities.

                                       8

<PAGE>   9


         Canadian Offshore Oil and Gas. Recent offshore oil and gas activity in
eastern Canada has concentrated on the development of the Hibernia and Terra
Nova fields, and Sable Island. The Company fabricated nine utility shaft modules
for the Hibernia field and delivered production well jackets to Sable Island.
The alliance which is developing Sable Island has committed that it will perform
the majority of the fabrication work for the project in the Province of Nova
Scotia. The Company operates the only facilities in Nova Scotia capable of
fabricating the production of well jackets, decks and certain other components
of these offshore platforms. Management believes that Sable Island will generate
significant fabrication and maintenance revenues for the Company over the next
three years.

     PULP AND PAPER

         The pulp and paper industry experienced severe pricing pressure from
the fall of 1995 through the spring of 1997 due principally to overbuilt
customer inventories caused by substantial price hikes during the period from
mid-1994 to the fall of 1995. As a result of this pricing pressure, many plant
managers deferred maintenance and canceled capital expenditure projects. The
American Forest & Paper Association's annual capacity survey projects capacity
growth is expected to increase 1.1% in 2000, 0.7% in 2001, and 0.4% in 2002; but
suggests pulp and paper producers are taking a more conservative view toward
pulp and paper demand growth. In November 1997, the U.S. Environmental
Protection Agency (the "EPA") issued the Cluster Rule which is an integration of
the Federal Clean Air and Clean Water Acts. The Cluster Rule imposes stricter
environmental regulations on the pulp and paper industry through the reduction
of pollutants generated by using elemental chlorine free bleaching technologies
which rely on chlorine dioxide rather than pure chlorine.

     POWER GENERATION

         As the Federal Energy Regulatory Commission has begun to implement the
provisions of the Energy Policy Act of 1992, which deregulates the electric
power generation industry by allowing independent power producers and other
companies access to its transmission and distribution systems, the electric
utility industry in the United States has become increasingly competitive.
Utilities are attempting to reduce their operating costs in order to produce
power at competitive market rates, and are accomplishing this, in part, by
deferring repairs and refurbishing their existing power stations. In the near
term, such deferred maintenance may reduce the amount of available outside
contract business. However, in the longer term, utility companies may make
necessary repairs in a manner similar to the evolution of outsourcing in the
petroleum refining industry.

INDUSTRIAL OUTSOURCING SERVICES

         The Company provides industrial outsourcing services which includes
specialty fabrication to clients in the petroleum and petrochemical refining,
power generation and forest products industries through the Turner Group, the
Lake Charles Group, Industra Service, Chempower and MM Industra. The industrial
outsourcing service business segment generated approximately 66.5% of the
Company's revenues during fiscal 1999.

         Turnarounds. Turnaround services include the maintenance of crude
distillation units, catalytic reformer units, delayed coker units, alkylation
units, platformers, fluid catalytic cracking units and butamer units as part of
a single project. These services also include the maintenance and modification
of heat exchangers, heaters, vessels and piping.

         Offshore Oil and Gas Structures. The Company operates two facilities in
Nova Scotia, Canada capable of fabricating platform topsides up to 1,800 tons,
production well jackets and piles up to 3,000 tons, subsea templates,
accommodation modules, BOP carriers and separation modules for use in the harsh
offshore environments of eastern Canada and the North Sea. In addition, the
Company's facilities have historically engaged in the refit, maintenance,
upgrade and modification of drilling rigs and other offshore structures utilized
by oil and gas companies and drilling contractors. The acquisition of the Pictou
facility provides an additional facility in Nova Scotia which, historically, has
conducted shipbuilding, ship repair and conversion, and industrial fabrication.

         Industrial Fabrication. The Company owns and operates approximately
900,000 square feet of facilities in North America where it fabricates piping,
power boiler assemblies, pressure vessels, reactors, drums, towers,
precipitators, heater coils and other equipment used in process industries. The
Company also performs emergency fabrication as necessary. In many instances,
facilities are operated 24-hours a day to assist a turnaround project.

                                       9

<PAGE>   10


         Planning and Project Management. The Company has developed the planning
capabilities, operational skills and field supervision techniques necessary to
manage all aspects of turnaround projects and other facility maintenance
services. During the management of a turnaround project, the Company is
responsible for cost control procedures, resource planning and scheduling,
safety control, hazardous material handling, personnel hiring and training,
equipment and tools procurement, field inspections, and overall project
coordination. Certain specialized types of welding are often provided directly
by the Company. Typically a portion of a turnaround project is performed by
subcontractors under the supervision of the Company. The Company also develops
suggested maintenance programs that incorporate its project experience.

         Fluid Catalytic Cracking Turnarounds. Fluid Catalytic Cracking Units
("FCCU") require a high level of maintenance due to extreme temperatures, in
excess of 1000(Degree)F inside the FCCU. The high temperature degrades the
refractory lining and stainless steel components inside the FCCU. Refractory
lining is heat resistant material designed to insulate the inner shell of the
FCCU. The main components of a FCCU are the reactor, the regenerator and the
flue gas exhaust system. The majority of FCCU maintenance during a turnaround
project is on this equipment. Major maintenance work is typically performed to
increase the efficiency of, and reduce the air pollution from, the FCCU.

         Dismantling and Demolition. Dismantling and demolition services are
provided when a customer has decommissioned an entire facility or unit within
its plant. A typical dismantling project begins by identifying potential safety
hazards and preparing a work plan. This includes an estimate of the number of
personnel and type of equipment necessary to complete the project. Personnel
then examine and, if necessary, drain refinery pipelines or remove asbestos or
other hazardous materials. Dismantled equipment is typically cut into scrap and
sold in the scrap market. The Company salvages certain equipment for resale by
the customer.

         ASME Code Stamp. Most of the Company's subsidiaries are qualified to
perform welding services on equipment that contain American Society of
Mechanical Engineer ("ASME") stamps. State agencies and insurance companies
typically require that ASME-certified welders perform services on ASME-coded
equipment.

         Instrumentation and Electrical. These services include lighting, power
and instrumentation wiring for electrical systems up to 5,000 volts, and the
installation, termination, troubleshooting and commissioning of transformers and
associated control and monitoring equipment. The Company is qualified to
calibrate and commission both electrical and pneumatic instrument systems. The
Turner Group has had extensive experience with the conversion and physical
design of distribution control systems.

         Bus Ducts and Sheet Metal. The Company's manufacturing services include
the fabrication of bus ducts for utilities, chemical and other industrial and
commercial customers. Chempower also manufacturers custom sheet metal products
which include metal casings for use in the telecommunications, gaming and
electronics industries.

         Structural Steel Outsourcing Systems. The Company fabricates and
erects, according to customer specifications, structural steel support systems
such as pipe racks.

ENVIRONMENTAL SERVICES

         The Company provides environmental and waste services through United
Eco, MART, USIS, and SRS. Remediation includes the on-site clean-up and
treatment of hazardous and non-hazardous organic and inorganic contaminants
utilizing a number of technologies. Waste services include removal,
encapsulation, stabilization, treatment and disposal services. The environmental
services business segment generated approximately 12.9% of the Company's
revenues during fiscal 1999. In fiscal 1997, the Company sold Eco Environmental
and Environmental Evolutions effective as of August 31, 1997 as part of the
Company's strategic plan to reduce its focus on asbestos remediation services.

         Site Remediation. Site remediation includes the on-site clean-up and
treatment of hazardous and non-hazardous organic and inorganic contaminants.
Waste services include removal, encapsulation, stabilization, treatment and
disposal services. The Company employs bioremediation, vapor extraction, thermal
desorption and other techniques to degrade hazardous and non-hazardous
contaminates in soil, sludges, slurries, and liquids contaminated with
hydrocarbons, creosote, pentachlorophenol, pentachloroethylene, PCB's, digester
sulfides, phenols, benzene, toluene, chlorinate aliphatic solvents and raw
sewage. The Company has developed and licenses certain technologies that it uses
in its site remediation business.

         Oil Separation and Removal Systems. SRS manufactures, sells, installs
and operates the SAREX(R) process, an integrated, three phase, oily water
processing treatment system that combines centrifugal technology for sludge
dewatering and oil recovery. This process is currently utilized by hydrocarbon
processing customers in the United States, France, South Africa, Venezuela, and
Singapore. Over 30,000 SAREX(R) oil separation and removal systems have been
installed in oil tankers and petroleum refineries around the world.

                                       10

<PAGE>   11


         Management recognizes that the environmental remediation industry,
which is largely the creation of federal legislation, is sensitive to shifts in
public opinion and legislation. While there is growing anti-regulatory sentiment
in the United States, management does not believe that this political trend will
have a substantial impact on the Company's environmental services business. The
Company has targeted projects involving soil, coal and tar remediation and
ground water cleanup. The cleanup projects on which the Company typically works
have already been designed and planned and, management believes, are unlikely to
be delayed or cancelled in the near term as a result of deregulation, if any.

CONSTRUCTION MANAGEMENT SERVICES

         The Company provides construction management services to a national
network of retailers with solid development and growth histories. The
capabilities include tenant improvement, renovations, additions and design build
services. With the growing emphasis on renovations and additions to existing
properties, the Company's clients, which are various national retail chains as
well as regional and local developers, have shifted their focus to
rehabilitation. These clients have embarked on programs to modernize existing
facilities to remain competitive and aesthetically pleasing to its customers.
The Company's focus is on fast track projects that require attention to detail
and comprehensive scheduling methods, along with onsite professional project
management. The construction management services segment generated approximately
20.6% of the Company's revenues during fiscal 1999.

MARKETING

         The Company obtains its contracts either through a competitive bidding
process or on a negotiated basis with long-standing customers. The Company
typically prepares bids for its services on a project basis. Fee arrangements
for services are typically bid either on a field-price or a detailed time and
material billing schedule. Bids are generally awarded based on price,
scheduling, performance, quality and safety. A substantial portion of the
Company's maintenance service is recurring in nature.

         The sales staff, operations managers and business development personnel
of each of the Company's subsidiaries are familiar with the capabilities of all
the Company's subsidiaries. The Company trains its personnel to identify
cross-selling opportunities and integrate the breadth of the Company's services
into each bid proposal. This provides the customer a more comprehensive
portfolio of services. The Company's cross-selling initiatives have resulted in
several successful projects which have involved multiple operating subsidiaries
of the Company and the performance of services internally which were
historically performed by third parties. The Company is attempting to cross-sell
its services so that it may win larger, single-source turnkey projects. In
fiscal 1997, the Company obtained a contract to fabricate and erect a 850-ton
bulk material ship loader in Port Moody, British Columbia. MM Industra
fabricated the "bridge" and other components of the ship loader, while Industra
Service completed the final assembly, erection, testing and commissioning of the
ship loader. In January 1998, SRS assigned all of its fabrication of SAREX(R)
units to MM Industra in Halifax. Proposals have been submitted for projects
employing one or more of the Company's subsidiaries. The Company has also
entered into strategic alliances with key technology suppliers in an effort to
position itself for larger contracts.

         The Company also enters into partnering arrangements and strategic
alliance with its customers, whereby the Company participates in the
pre-planning stages of projects. This early involvement by the Company enhances
its knowledge of the customers' needs.

         The Company, through its SRS subsidiary, has entered in three strategic
alliances with established companies in Venezuela, France, and South Africa.
These alliances have enhanced the Company's ability to grow its other
outsourcing businesses internationally by providing the Company an international
presence.

COMPETITION

         The market for industrial outsourcing services, including specialty
fabrication, is highly competitive with numerous companies of various sizes,
geographic presence and capabilities participating. Management believes that the
typical provider of industrial outsourcing services in North America is a small-
to medium-sized company that serves customers in one region, and offers a
limited range of services. The Company competes with numerous small, independent
contractors in the environmental and construction management sectors which,
collectively, have a significant overall share of the market for these services.
Certain of the Company's competitors have greater financial resources or offer
specialized technologies or services not provided by the Company. Management
believes that none of the Company's competitors match the Company's geographic
diversity and breadth of services. The principal competitive factors for
industrial outsourcing services are price, quality, scope of services offered,
and safety.

                                       11

<PAGE>   12


RESEARCH AND DEVELOPMENT

         The Company does not have a research and development program. However,
when required for specific applications the Company obtains technology licenses
or partnering agreements.

CUSTOMERS

         During fiscal 1999, the Company generated approximately 66.5% of its
revenues from industrial customers in general and 31.9% of its revenues from
customers in the petroleum and petrochemical refining business in particular.
Grenadier Properties, Bantrel Inc. (agent for Suncor), Huntsman Chemical, Sable
Offshore Energy, and Aalborg Industries together accounted for approximately
25.0% of the Company's total revenues in fiscal 1999, compared to 40.2% of
revenues from its top five customers in fiscal 1998. Grenadier Properties
accounted for approximately 7.0% of the Company's fiscal 1999 revenues, and
Bantrel Inc. (agent for Suncor) accounted for approximately 6.9% of the
Company's fiscal 1999 revenues. No other customer accounted for more than 5% of
the Company's revenues in fiscal 1999. Management believes that the Company's
continued efforts to expand and diversify its customer base should reduce the
Company's dependence on certain key customers.

BACKLOG

         At November 30, 1999, the Company's backlog was approximately $280.0
million, compared to approximately $275.0 million of backlog for such contract
work at November 30, 1998. Backlog represents the amount of revenue that the
Company expects to realize from work to be performed on uncompleted contracts in
progress and from contractual agreements upon which work has not commenced.
Contracts included in backlog may have provisions which permit cancellation or
delay in their performance by the customer and there can be no assurance that
any work orders included in backlog will not be modified, canceled or delayed.

EMPLOYEES

         At January 31, 2000, the Company employed approximately 255 full-time
employees and 1,571 hourly workers. Total employment levels ranged from
approximately 1,407 to 2,840 workers per week during fiscal 1999. The Company's
experience has been that hourly-rate employees are generally available over an
extended period of time in the quantity, and at the skill levels necessary for
its projects. Some of the employees are covered by union contracts expiring at
various dates. The Company has not experienced a significant work stoppage and
considers its employee relations to be good.

RAW MATERIALS

         The Company has not experienced any difficulties obtaining the raw
materials needed by its operating subsidiaries.

GOVERNMENT REGULATION AND RISK MANAGEMENT

         Certain of the Company's services involve contact with crude oil,
refined petroleum products, asbestos and other substances classified as
hazardous material under the various federal, state and local environmental
laws. Under these laws, hazardous material is regulated from the point of
generation to the point of disposal. In addition, the EPA has issued regulations
for hazardous waste remediation contractors. To management's knowledge, the
operating segments have obtained all required permits and licenses in the
jurisdictions in which they operate.

         The Company's United States operations are subject to regulations
issued by the United States Department of Labor under the Occupational Safety
and Health Act ("OSHA"). These regulations set forth strict requirements for
protecting personnel involved with any materials that are classified as
hazardous, which includes materials encountered when performing many of the
Company's services. There are similar federal and provincial rules governing the
Company's Canadian operations. Violations of these rules can result in fines and
suspension of licenses. To the best of management's knowledge, the Company and
all of its operating subsidiaries are in material compliance with OSHA and
Canadian regulations.

                                       12

<PAGE>   13


         The Company's safety and training efforts are conducted primarily at
the subsidiary level. In addition to training designed to advance the skill
level of individual employees, the Company uses entry level screening and
broad-based skills development programs to improve the overall quality and
technical competence of its work force. The Company has a designated safety
officer at each of its operating subsidiaries who is responsible for compliance
with applicable governmental procedures and the Company's internal policies and
practices. All of the Company's technicians are subject to pre-employment,
scheduled and random drug testing. The Company's operations and personnel are
subject to significant regulations and certification requirements imposed by
federal, state and other authorities.

         The Company maintains worker's compensation insurance in accordance
with statutory requirements and contractors' general liability insurance with an
annual aggregate coverage limit that varies with each subsidiary. The Company's
general liability insurance specifically excludes all pollution related claims
and fines levied against the Company as a result of any violations by the
Company of the regulations issued by the Department of Labor under OSHA. To
date, the Company has not incurred any significant fines or penalties or any
liability for pollution, environmental damage, toxic torts or personal injury
from exposure to hazardous wastes. However, a successful liability claim for
which the Company is only partially insured or completely uninsured could have a
material adverse effect on the Company. In addition, if the Company experiences
a significant amount of such claims, increases in the Company's insurance
premiums could materially and adversely affect the Company. Any difficulty in
obtaining insurance coverage consistent with industry practice may also impair
the Company's ability to obtain future contracts, which in most cases are
conditioned upon the availability of specified insurance coverage. The Company
has not experienced any difficulty in obtaining adequate insurance coverage for
its businesses.

         The Company has arranged for a surety line to post performance and
payment bonds on contracts should a customer request that the Company post such
bonds as a condition to the granting of a contract to the Company.

                                       13

<PAGE>   14


ITEM 2. PROPERTIES

         The location, ownership, primary use and approximate square footage of
the facilities of the Company are set forth in the following table. The
principal administrative offices of the Company are maintained in Toronto,
Canada and Houston, Texas. The Company owns 13 facilities and leases an
additional 14 facilities in the United States and Canada. The Company believes
that its existing facilities are adequate to meet current requirements and that
suitable additional or substitute space would be available as needed to
accommodate any expansion of operations.

<TABLE>
<CAPTION>
                                                                                                APPROXIMATE
                                                                             PRIMARY            SQUARE FEET
         BUSINESS UNIT AND SITE LOCATION               OWNERSHIP             USE (1)           OF FLOOR SPACE
         -------------------------------               ---------             -------           --------------
<S>                                                     <C>           <C>                          <C>
AMERICAN ECO
     Toronto, Ontario............................       Leased                 Adm.                  3,000
     Houston, Texas..............................       Leased                 Adm.                 14,000
CCG
     Dallas, Texas...............................       Leased                 Adm.                 12,292
     Dallas, Texas...............................       Leased              Adm./Whse                7,000
     Rockwall, Texas.............................       Leased                 Adm.                  1,000
CHEMPOWER
     Canton, Ohio................................       Owned               Adm./Mfg.              205,000
     Cincinnati, Ohio............................       Owned              Adm./Const.              25,000(4)
     Las Vegas, Nevada...........................       Leased              Adm./Fab.               47,000
     Washington, Pennsylvania....................       Owned            Adm./Const./Fab.          112,000(2)
     Waverly, Tennessee..........................       Owned            Adm./Const./Mfg.           95,000
     Winfield, West Virginia.....................       Owned              Adm./Const.              90,000
INDUSTRA SERVICE
     Edmonton, Alberta...........................       Leased          Adm./Const./Fabr.           50,000
     New Westminster, British Columbia...........       Owned         Adm./Const./Mfg./Fabr.        74,000
     Portland, Oregon............................       Leased           Adm./Const./Eng.           22,000
     Gresham, Oregon.............................       Leased                 Adm.                 18,049
LAKE CHARLES GROUP
     Lake Charles, Louisiana.....................       Owned           Adm./Const./Fabr.           10,000
MART
     Vineland, New Jersey........................       Leased             Adm./Therm.              17,550
MM INDUSTRA
     Dartmouth, Nova Scotia......................       Owned               Adm./Fab.               60,000
     Dartmouth, Nova Scotia......................       Owned              Fab./Const.             110,000
     Pictou, Nova Scotia.........................       Owned              Fab./Const.              85,000
SRS
     Irvine, California..........................       Leased            Adm./Mfg./Eng.            24,000
TURNER GROUP
     Bridge City, Texas..........................       Owned               Adm./Fabr.               2,700
     Port Arthur, Texas..........................       Owned            Adm./Const./Fab.           61,400(3)
     Lufkin, Texas...............................       Leased                 Adm.                  1,600
UNITED ECO
     Highpoint, North Carolina...................       Owned           Adm./Const./Remed.           7,500
     Apex, North Carolina........................       Leased                 Adm.                  5,000(4)
     Blacksburg, Virginia........................       Leased                 Lab.                  5,000(4)
</TABLE>

----------------

(1)  Adm. = Administration; Const. = Construction warehouse; Mfg. =
     Manufacturing facility; Fabr. = Fabrication facility; Ther. = Thermal
     facility; Eng. = Engineering facility; Remed. = Remediation facility; Lab.
     = Laboratory; Whse. = Warehouse.

(2)  Amount includes approximately 30,000 square feet of floor space leased to
     unaffiliated tenants.

(3)  This facility is situated on 9.1 acres and contains 29,500 square feet of
     office and warehouse space and 31,900 square feet of covered fabrication
     area. The facility also consists of 22.7 acres of raw land.

(4)  This facility is 100% subleased to a third party.

         Most of the owned properties are mortgaged as security for the
Company's line of credit.

                                       14

<PAGE>   15


ITEM 3. LEGAL PROCEEDINGS

         The United States Attorney for the Middle District of Louisiana (the
"US Attorney") advised Advanced Coil Industries ("ACI") a division of Chempower,
a subsidiary of the Company acquired in March 1997, that ACI and several others
are the subject of a Federal criminal grand jury investigation in connection
with possible improper markings on coated steel used on highway construction
projects in Louisiana. The alleged improper markings occurred in 1994 and 1995,
prior to the Company's acquisition of Chempower. The U.S. Attorney and ACI have
agreed that in the event criminal charges are filed, no criminal charges will be
filed against ACI until on or after March 5, 2000. The U.S. Attorney has also
advised ACI that a civil suit has been filed under seal in Baton Rouge,
Louisiana in which ACI is one of several names or potential defendants alleged
to have violated the Federal False Claims Act. As the civil suit was filed under
seal and is unavailable for ACI's review, the Company has not had the
opportunity to review the factual basis of the alleged claim nor the method by
which damages might be calculated. In May 1999, the Company received a report
from the U.S. Attorney setting forth its determination of the possible civil
damages by all parties, including ACI. The Company is reviewing the report with
respect to the methodology and the extent of involvement of ACI. However, if a
potential action by the U.S. Attorney and/or under the civil action against ACI
is successful, it could be material to the financial position of the Company.

         The Company and its operating subsidiaries are currently involved in
various other claims and disputes in the normal course of business. Management
believes that the disposition of all such claims, individually or in the
aggregate, will not have a material adverse effect on the Company's financial
condition, results of operations or cash flows except as disclosed above.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Company did not submit any matter to a vote of shareholders during
the last quarter of fiscal 1999 through the solicitation of proxies or
otherwise.

                                       15

<PAGE>   16


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PUBLIC MARKET FOR COMMON SHARES

         The Company's Common Shares are traded on The Toronto Stock Exchange
and the Nasdaq National Market under the trading symbols ECX and ECGO,
respectively. On May 6, 1999, the Company announced a symbol change from ECGOF
to ECGO. As of January 31, 2000, there were 726 shareholders of record. The
Company believes that the number of beneficial holders is significantly greater
than the number of record holders as a large number of shares are held of record
in nominee or broker names.

         The following table provides the quarterly high ask and low bid prices
for the Company's Common Shares on the Nasdaq National Market and The Toronto
Stock Exchange for the two years ended November 30, 1999

<TABLE>
<CAPTION>
                                                   NASDAQ            TORONTO STOCK
                                              NATIONAL MARKET          EXCHANGE
                                                    (US$)               (CDN$)
                                              HIGH         LOW
                                               ASK         BID     HIGH        LOW
                                              ------      -----    ------     ------

<S>                                           <C>         <C>     <C>         <C>
Fiscal year ended November 30, 1999
     First quarter........................    $ 2.66      $1.28    $ 4.05     $ 2.00
     Second quarter.......................      2.50       1.34      3.60       2.01
     Third quarter........................      2.19       1.16      3.14       1.80
     Fourth quarter.......................      1.38        .69      2.00       1.00
Fiscal year ended November 30, 1998
     First quarter........................    $12.25      $8.69    $17.75     $12.25
     Second quarter.......................     11.25       6.75     16.00      10.00
     Third quarter........................      8.00       2.44     11.40       4.00
     Fourth quarter.......................      3.19       1.81      4.90       2.90
</TABLE>

         The Company is subject to covenants in its Indenture and General
Electric Credit Corporation line of credit which restrict or limit the payment
of cash dividends on its Common Shares. Notwithstanding such restrictions and
limitations, it is the Company's present policy to retain future earnings for
use in its business.

PRIVATE PLACEMENTS OF COMMON SHARES

         During the fourth quarter of fiscal 1999, the Company did not effect
any private placements of its Common Shares.

ITEM 6. SELECTED FINANCIAL DATA

         Environmental Evolutions was acquired in January 1996, both SRS and
Industra Service were acquired in July 1996, MM Industra was acquired in
September 1996, Chempower was acquired in March 1997 and CCG was acquired in
September 1997. Eco Environmental and Environmental Evolutions were sold by the
Company in August 1997, effective as of August 31, 1997. The statement of
operations for the year ended November 30, 1995 reflects five months of
operations for the Lake Charles Group. The statement of operations for the year
ended November 30, 1996 reflects eleven months of operations for Environmental
Evolutions, six months of operations for United Eco, four months of operations
for SRS and Industra Service and one month of operations for MM Industra. The
statement of operations for the year ended November 30, 1997 reflects nine
months of operations for Chempower, three months of operations for CCG and nine
months of operations for Eco Environmental and Environmental Evolutions prior to
their sale. The statement of operations for the year ended November 30, 1999
included nine months of operations for Tony Crawford Construction, and the
following USIS subsidiaries were included for the time period indicated: P.W.
Stephens Residential, Inc. - three months; Atnam, Inc. - two months; and P.W.
Stephens Services, Inc. - twelve months.

                                       16

<PAGE>   17


         The following information should be read in conjunction with the
Consolidated Financial Statements and the notes thereto and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere herein. All amounts have been reclassified for
discontinued operations as more fully described in Note 18 to the Consolidated
Financial Statements.

<TABLE>
<CAPTION>
                                                                                     FISCAL YEAR ENDED
                                                                                        NOVEMBER 30
                                                         1999            1998              1997             1996            1995
                                                                      (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<S>                                                   <C>             <C>               <C>              <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenue ..........................................    $  258,077      $  276,489        $  194,157       $  119,529     $   46,684
Operating earnings (loss) ........................       (31,510)        (26,613)           19,102            9,480          3,773
Interest expense .................................        11,387           9,166             4,770            1,747            713
Earnings (loss) from continuing operations .......       (42,007)        (28,482)           16,317            7,954          3,060
Earnings (loss) from discontinued operations .....        (4,264)         (1,697)            1,118               --             --
Net earnings (loss) ..............................       (46,271)        (30,179)           17,435            8,763          2,852
Net earnings (loss) per share, basic .............    $    (2.12)     $    (1.44)       $     1.08       $     0.81     $     0.40

Weighted average shares outstanding ..............        21,787          20,965            16,218           10,846          7,217

BALANCE SHEET DATA:
Working capital ..................................    $   36,130      $   80,440        $   59,907       $    3,280     $    6,639
Total assets .....................................       236,924         250,383           211,786          104,484         31,061
Current debt .....................................        18,792             630             8,081           22,107          4,497
Long-term debt ...................................       121,006         120,689            51,722            6,720          2,100
Shareholders' equity .............................        45,924          90,238           107,099           55,043         18,736
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

         American Eco through its subsidiaries is a leading provider of
industrial outsourcing which includes specialty fabrication and environmental
services to principally three industry groups in the United States and Canada:
(i) energy, (ii) pulp and paper and (iii) power generation. The Company also
provides construction management services to a select group of commercial owners
and developers. The Company offers its customers outsourcing solutions for an
extensive array of support services such as equipment and facility repair,
maintenance, refurbishment, retrofit and expansion. The Company's specialty
fabrication services include the construction of decks, well jackets and modules
for offshore oil and gas platforms, the fabrication of piping, pressure vessels,
boiler tube bundles, and other equipment used in process industries, as well as
the erection of structural steel support systems. The Company also manufactures,
sells, installs and operates SAREX(R) oil filtration and separation systems
worldwide. Its environmental services include diversified waste recycling and
other material handling processes.

         The trend toward greater customer emphasis on outsourcing dictates that
support services companies provide an increasing breadth of services. This
market trend is the primary tenet of the Company's acquisition strategy, and has
precipitated consolidation in the industrial outsourcing markets in North
America.

         A substantial portion of the Company's work is recurring in nature,
either through long-term contracts or long-standing customer relationships. At
November 30, 1999, the Company had project backlog of approximately $280
million, substantially all of which it expects to realize within the next twelve
months.

SEASONALITY AND QUARTERLY FLUCTUATIONS

         The Company's revenues from its industrial, environmental and
construction management segments may be affected by the timing of scheduled
outages at its industrial customers' facilities and by weather conditions with
respect to projects conducted outdoors. The effects of seasonality may be offset
by the timing of large individual contracts, particularly if all or a
substantial portion of the contracts fall within a one- to two-quarter period.
Accordingly, the Company's quarterly results may fluctuate and the results of
one fiscal quarter should not be deemed to be representative of the results of
any other quarter or for the full fiscal year.

                                       17

<PAGE>   18


RECOGNITION OF REVENUES

         The Company recognizes revenues and profits on contracts using the
percentage-of-completion method of accounting. Under the
percentage-of-completion method, contract revenues are accrued based upon the
percentage that accrued costs to date bear to total estimated costs. As contacts
can extend over more than one accounting period, revisions in estimated total
costs and profits during the course of work are reflected during the period in
which the facts requiring the revisions become known. Losses on contracts are
charged to income in the period in which such losses are first determined. The
percentage-of-completion method of accounting can result in the recognition of
either costs and estimated earnings in excess of billings or billings in excess
of costs and estimated earnings on uncompleted contracts, which are classified
as current assets and liabilities, respectively, in the Company's balance sheet.
See Note 1 to Consolidated Financial Statements.

RESULTS OF OPERATIONS

         Fiscal 1999 to fiscal 1998

         Revenues

         The Company's revenues decreased 6.7% to $258.1 million in fiscal 1999
from $276.5 million in fiscal 1998 partly as a result of the recognition of
revenues from a joint venture project with MIL Davie Industries, Ltd. and a
one-time project involving the construction of a major pipeline project in
Ontario, Canada with Steen in 1998. Total revenues relating to these projects
were $56.0 million. This is partially offset by the consolidation of USIS and
the acquisition of Tony Crawford Construction.

         During fiscal 1999, the Company generated approximately 66.5% of its
revenues from industrial outsourcing services, 20.6% of its revenues from the
construction management services, and 12.9% from its environmental services. The
Company has provided its services to the energy, pulp and paper, power
generation, and retail industries in North America. Approximately 1% of the
Company's revenues has been generated from international opportunities.

         Grenadier Properties, Bantrel Inc. (agent for Suncor), Huntsman
Chemical, Sable Offshore Energy, and Aalborg Industries together accounted for
approximately 25.0% of the Company's total revenues in fiscal 1999, compared to
40.2% of revenues from its top five customers in fiscal 1998. Grenadier
Properties accounted for approximately 7.0% of the Company's fiscal 1999
revenues, and Bantrel Inc. (agent for Suncor) accounted for approximately 6.9%
of the Company's fiscal 1999 revenues. No other customer accounted for more than
5% of the Company's revenues in fiscal 1999. Management believes that the
Company's continued efforts to expand and diversify its customer base should
reduce the Company's dependence on certain key customers.

         The Company's industrial outsourcing segment generated $171.6 million
or 66.5% of the Company's total revenues in fiscal 1999 compared to $233.2
million or 84.3% of the Company's total revenues in fiscal 1998. This decrease
is primarily attributable to the $56.0 million from joint venture projects
discussed above. Management anticipates that the industrial outsourcing business
will continue to grow and provide consistent recurring revenue for the Company.

         The revenues generated from the Company's construction management group
increased to $53.1 million or 20.6% of the Company's total revenues in fiscal
1999 compared to $29.2 million or 10.6% of the Company's total revenues in
fiscal 1998. CCG experienced a $21 million increase in revenues from the
acquisition of Tony Crawford Construction.

         The revenues generated from the Company's environmental services
segment increased by 136% to $33.3 million in fiscal 1999 from $14.1 million in
fiscal 1998, which reflects the consolidation of $22.9 million of USIS in 1999.

                                       18

<PAGE>   19


         Operating Expenses

         The Company's total operating expenses decreased approximately 4.5% to
$289.6 million in fiscal 1999 from $303.1 million in fiscal 1998 partly as a
result of the operations of the joint ventures in 1998. Expressed as a
percentage of total revenues, operating expenses were approximately 112.2% in
fiscal 1999 compared to 109.6% in fiscal 1998. Direct costs increased to 87.2%
in fiscal 1999 compared to 85.4% in fiscal 1998 primarily due to an execution
problem associated with a contract entered into in 1999 and a tighter overall
business environment. Selling, general and administrative expenses decreased to
$29.5 million in fiscal 1999 compared to $34.7 million in fiscal 1998 due to the
Steen and Davie contracts in 1998 and management's cost cutting efforts in 1999.
As a percentage of total revenues, selling, general and administrative expenses
decreased to 11.4% in fiscal 1999 compared to 12.6% in fiscal 1998. In 1998,
operating expense also includes the $1.6 million expense incurred to purchase
the 49% interest in the Steen Pipeline joint venture not originally owned by the
Company and $4.5 million in fees paid related to the Steen pipeline joint
venture, which have been categorized as operating expenses associated with the
Steen pipeline project due to its treatment as a one-time project, rather than a
going concern. In 1998, SG&A was negatively impacted by certain costs associated
with the Company's management changes. SG&A also includes an aggregate of $0.4
million in signing bonuses paid to Mr. Fradella and Mr. Posner in 1998, who are
no longer employed by the Company. The Company is intent on reducing overhead
costs at all levels. An aggressive plan was implemented in late 1998 to reduce
company wide SG&A and will continue through 2000.

         The Company's interest expense on long term debt increased in fiscal
1999 to $11.4 million from $9.2 million and as a percentage of total revenue,
interest expense increased to 4.4% compared to 3.3% in fiscal 1998. During
fiscal 1999, the Company entered into a $30 million revolving credit facility
with General Electric Capital Corporation. At November 30, 1999, the Company's
debt to equity ratio was .75:1 and its current ratio was 1.5:1. Management will
seek to control future operating expenses, but there can be no assurance that
the Company's cost control policies will be as effective.

         Provision for Income Tax

         In fiscal 1999 the Company had a loss from continuing operations before
provision for recovery of income taxes of $42.9 million. A recovery of income
taxes of $0.9 million reduced the Company's net loss from continuing operations
to $42.0 million.

         Discontinued Operations

         During the second quarter of fiscal year 1999, management adopted plans
to discontinue the switchgear operations of Chempower and the engineering
business of Industra. The switchgear business was sold on June 1, 1999, and the
Company expects to divest the remaining engineering business during 2000. The
loss from these discontinued operations for 1999 and 1998 was $4,264 and $1,697,
respectively, net of $2,211 and $911 income tax benefit, respectively.

         Net Earnings (Loss)

         The Company incurred a net loss of $46.3 million or $2.12 per share in
fiscal 1999 compared to a loss of $30.2 million or $1.44 per share in fiscal
1998. A tax recovery of $0.9 million in fiscal 1999 compares to a tax recovery
of $8.8 million in fiscal 1998.

Fiscal 1998 Compared to Fiscal 1997

         Revenues

         The Company's revenues grew 42.3% to $276.5 million in fiscal 1998 from
$194.2 million in fiscal 1997 partly as a result of the recognition of revenues
from a joint venture project with MIL Davie Industries, Ltd. and a one-time
project involving the construction of a major pipeline project in Ontario,
Canada with Steen. Total revenues relating to these projects was $56.0 million.
Most operating units generated internal growth in fiscal 1998. MM Industra
experienced a 381% increase in revenues over fiscal 1997 primarily due to the
inclusion of revenue from the previously mentioned contracts and joint venture
in Canada, Industra Service generated a 25.7% increase in revenue from expansion
of its Edmonton, Alberta, Canada unit, Chempower generated a 37.6% increase in
revenue over fiscal 1997 as fiscal 1998 was the first full reporting year since
its acquisition by the Company, and The Turner Group generated a 14.1% increase
in revenue from existing operations. CCG generated a 210% increase in revenue,
however, its fiscal 1997 revenues were recognized only from September 1, 1997 to
November 30, 1997. Two operating divisions, SRS and United Eco Systems, each
showed a decline in revenue in fiscal 1998 of approximately 50%. The decline
relates primarily to work performed by these divisions in fiscal 1997 for MART.

                                       19

<PAGE>   20


         During fiscal 1998, the Company generated approximately 84.3% of its
revenues from industrial support services, 10.6% of its revenues from the
construction management services, and 5.1% from its environmental remediation
services. The Company has provided its services to the energy, pulp and paper,
power generation, and retail industries in North America. Approximately 1% of
the Company's revenues have been generated from international opportunities.

         Huntsman Chemical, TransCanada Pipeline, Petrodrill, Oramet and
Kilbourne Engineering together accounted for approximately 40.2% of the
Company's total revenues in fiscal 1998 compared to the Company's top six
customers in fiscal 1997 which accounted for approximately 31.3% of revenues for
such year. TransCanada Pipeline accounted for approximately 16% of the Company's
revenues in fiscal 1998 under a joint venture with Steen, a subsidiary of
Dominion Bridge, which contract has been completed and is non-recurring,
Huntsman Chemical accounted for approximately 8.3% of the fiscal 1998 revenues
and Petrodrill accounted for approximately 5.4% of such revenues under a
contract which has been terminated (see "Item 1. Business - Other Business
Ventures"). None of the other above-listed customers represented more than 5% of
the Company's fiscal 1998 revenues. The Company is expanding and diversifying
its customer base in an attempt to reduce the Company's dependence in the future
on certain key customers.

         The Company's industrial support segment generated $233.2 million or
84.3% of the Company's total revenues in fiscal 1998 compared to $144.9 million
or 74.6% of the Company's total revenues in fiscal 1997.

         The revenues generated from the Company's construction management group
increased to $29.1 million or 10.6% of the Company's total revenues in fiscal
1998 compared to 5.4% in fiscal 1997. Revenue is generated primarily from the
CCG unit based in Dallas, Texas which was acquired as of September 1, 1997.
Accordingly, revenues from fiscal 1997 are included only for the fourth fiscal
quarter of such year.

         The revenues generated from the Company's environmental services
segment decreased by 63.6% to $14.1 million in fiscal 1998 from $38.8 million in
fiscal 1997, which decrease reflects the sale of Eco Environmental and
Environmental Evolutions on August 31, 1997.

         Operating Expenses

         The Company's total operating expenses increased approximately 73.1% to
$303.1 million in fiscal 1998 from $175.1 million in fiscal 1997 partly as a
result of adding the operations of the joint ventures to MM Industra's revenues
and including Chempower and CCG for the full year of fiscal 1998. Expressed as a
percentage of total revenues, operating expenses were approximately 109.6% in
fiscal 1998 compared to 90.2% in fiscal 1997. Direct costs increased to 85.4% in
fiscal 1998 compared to 74.4% in fiscal 1997 as a direct result of joint venture
activity. Selling, general and administrative expenses increased to $34.7
million in fiscal 1998 compared to $25.6 million in fiscal 1997. As a percentage
of total revenues, selling, general and administrative expenses decreased to
12.6% in fiscal 1998 from 13.2% in fiscal 1997. Operating expense also includes
the $1.6 million expense incurred to purchase the 49% interest in the Steen
Pipeline joint venture not originally owned by the Company and $4.5 million in
fees paid related to the Steen pipeline joint venture, which have been
categorized as operating expenses associated with the Steen pipeline project due
to its treatment as a one-time project, rather than a going concern. SG&A was
negatively impacted by certain costs associated with the Company's management
changes and $3.0 million in non-cash accounts receivable and other charges taken
in the fourth quarter of fiscal 1998. SG&A also includes an aggregate of $0.4
million in signing bonuses paid to Mr. Fradella and Mr. Posner, who are no
longer employed by the Company. The Company is intent on reducing overhead costs
at all levels. An aggressive plan was implemented in late 1998 to reduce
corporate SG&A by at least $2.5 million in fiscal 1999.

         The Company's interest expense on long term debt increased in fiscal
1998 to $9.2 million from $4.8 million and as a percentage of total revenue,
interest expense increased to 3.3% compared to 2.5% in fiscal 1997. During
fiscal 1998, the Company issued $120 million principal amounts of 9-5/8% Senior
Notes and repaid approximately $71.3 million of outstanding indebtedness. At
November 30, 1998, the Company's debt to equity ratio was .57:1 and its current
ratio was 3.1:1. Management will seek to control future operating expenses, but
there can be no assurance that the Company's cost control policies will be as
effective.

         Provision for Income Tax.

         In fiscal 1998 the Company has a loss before provision for recovery of
income taxes and discontinued operations of $37.3 million. A recovery of income
taxes of $8.8 million reduced the Company's net loss before discontinued
operations to $28.5 million. The recovery includes approximately $2.4 million of
net operating loss carryback.

                                       20

<PAGE>   21


         Discontinued Operations

         During the second quarter of fiscal year 1999, management adopted plans
to discontinue the switchgear operations of Chempower and the engineering
business of Industra. The switchgear business was sold on June 1, 1999, and the
Company expects to divest the engineering business during 2000, although no
assurances can be made that a sale will be consummated. The earnings (loss) from
these discontinued operations for 1998 and 1997 was ($1,697) and $1,118,
respectively, net of ($911) and $576 income tax provision (benefit),
respectively.

         Net Earnings (Loss)

         The Company incurred a net loss of $30.2 million or $1.44 per share in
fiscal 1998 compared to a profit of $17.4 million or $1.08 per share in fiscal
1997. A tax recovery of $8.8 million in fiscal 1998 compares to a tax provision
of $1.3 million in tax expense in fiscal 1997.

         Liquidity and Capital Resources

         The Company's cash decreased from $21.8 million on November 30, 1998 to
$5.5 million at November 30, 1999. This decrease is the result of the payment of
$3,000 related to the Petrodrill/Amethyst settlement, and the funding of
operations.

         During fiscal year 1999, the Company utilized net cash in operating
activities of $40.3 million compared to $3.8 million for fiscal 1998. In fiscal
1999, the Company had a net loss of $46.3 million which includes the writedown
of investments and non-recurring charges of $29.3 million. In fiscal 1998, the
Company had a net loss of $30.2 million which includes asset impairment,
litigation, and other costs of $27.1 million.

         The Company's investing activities provided $13.0 million compared to
$23.3 million utilized in fiscal 1998. Net cash provided by investing activities
during the current fiscal year consisted primarily of proceeds from sale of
assets and acquisitions of businesses and collections of notes receivables,
partially offset by capital expenditures and increased investments.

         The Company's financing activities in fiscal 1999 provided $9.6 million
of net cash compared to $48.6 million in fiscal 1998. The increase in 1998 was
primarily due to the May 1998 issuance of $120 million of Senior Notes. As
permitted by the Indenture under which the Senior Notes were issued, the Company
obtained a line of credit facility of approximately $30 million collateralized
by the Company's accounts receivable. The credit facility is used to finance the
Company's working capital needs.

         The Company's cash requirements consist of working capital needs,
obligations under its leasing and promissory notes and capital expenditures. The
Company believes that its current cash position, the expected cash flow from
operations, the sales of certain non-operating assets, and the anticipated
availability of its line of credit should be sufficient throughout the next 12
months to finance its working capital needs, planned capital expenditures, and
debt service requirements.

         The sales of non-operating assets include $5.0 million of proposed
property sales, receipt of monies owed related to the Amethyst contracts and
other contracts of $4.2 million and the monetization of at least a portion of
the Company's $9.0 million investment in USIS. Although, no assurances can be
given as to the receipt of these monies, management is confident these assets
will be turned to cash in the near future.

         The accounts receivable at November 30, 1999 were $62.2 million
compared to $50.8 million at November 30, 1998 after deducting allowances of
$4.5 million and $2.4 million for doubtful accounts at fiscal 1999 and 1998,
respectively. A portion of this increase related to the consolidation of USIS
and the acquisition of Tony Crawford Construction. The current portion of notes
receivable decreased to $4.3 million at November 30, 1999 from $5.1 million at
November 30, 1998. Inventory decreased to $16.7 million at November 30, 1999
from $23.1 million at November 30, 1998.

         In May 1999, the Company and its principal subsidiaries entered into a
Credit Agreement with General Electric Capital Corporation as lender and agent
for additional lenders. The Credit Agreement as amended provides for a
collateralized Revolver of up to $30 million to be used for working capital and
other general corporate purposes and is based upon certain eligible accounts
receivable. The outstanding balance on the Revolver is $18.0 million with an
unused commitment of $12.0 million and availability of $7.5 million.


                                       21

<PAGE>   22


INFORMATION REGARDING FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-K includes forward looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements which are other than
statements of historical facts. Forward looking statements involve risks and
uncertainties which could cause actual results or outcomes to differ materially.
The Company's expectations and beliefs are expressed in good faith and are
believed by the Company to have a reasonable basis but there can be no assurance
that management's expectations, beliefs or projections will be achieved or
accomplished. In addition to other factors and matters discussed elsewhere
herein, the following are important factors that, in the view of the Company,
could cause actual results to differ materially from those discussed in the
forward-looking statements: the availability of debt or equity capital to fund
the Company's working capital needs and capital requirements, the ability of the
Company to manage its operations effectively, the reduction in outsourcing by
the industrial groups serviced by the Company, the collection and realization of
its investments and notes receivable, the economic conditions that could affect
demand for the Company's services, the adverse outcome of litigations and
proceedings, the ability of the Company to liquidate non-operating assets, the
ability of the Company to complete projects profitably and the severe weather
conditions that could delay projects.

Impact of the Year 2000 Issue

         The Company believes that its vendors and customers are in compliance
with the Year 2000 Issue and has not had any material problems.

         The Year 2000 Issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year. Any of
the Company's computer programs that have data-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in other routine business activities.

         Based on a recent assessment, the Company determined that it was
required to modify or replace significant portions of its software so that its
computer systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications that have been done to
existing software and conversions to new software, the Year 2000 Issue has been
mitigated.

         Based on presently available information, the Company has initiated
formal communications with all of its significant suppliers and large customers
to determine the extent to which the Company is vulnerable to the failure of
these third parties to remediate their own Year 2000 Issues. However, there can
be no guarantee that the systems of other companies on which the Company's
system rely will be timely converted, or that a failure to convert by another
company or a conversion that is incompatible with the Company's systems, would
not have material adverse effect on the Company.

         The Company utilized both internal and external resources to reprogram,
or replace, and test the software for Year 2000 modifications. The Company has
completed the Year 2000 project. The total cost of the Year 2000 project and was
funded through operating cash flows of the Company.

                                       22

<PAGE>   23


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                            AMERICAN ECO CORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS

                                NOVEMBER 30, 1999



                                       23

<PAGE>   24



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Shareholders and Directors of
American Eco Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and changes in
financial position present fairly, in all material respects, the financial
position of American Eco Corporation and its subsidiaries at November 30, 1999
and 1998, and the results of their operations and their changes in financial
position for each of the three years in the period ended November 30, 1999 in
conformity with accounting principles generally accepted in Canada. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

As discussed in Note 1 to the Consolidated Financial Statements, the Company
changed its method of accounting for income taxes in 1998.



PricewaterhouseCoopers LLP

Miami, Florida
March 6, 2000



                                       24

<PAGE>   25


                            AMERICAN ECO CORPORATION
                           CONSOLIDATED BALANCE SHEET
                      (United States Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                                  At November 30
                                                                                            ----------------------------
                               ASSETS                                                          1999              1998
                               ------                                                       ----------        ----------
<S>                                                                                         <C>               <C>
CURRENT ASSETS
         Cash                                                                               $    5,480        $   21,821
         Accounts receivable, trade, less allowance for doubtful accounts of
            $4,528 in 1999 and $2,378 in 1998                                                   62,185            50,793
         Current portion of notes receivable                                                     4,266             5,080
         Costs and estimated earnings in excess of billings                                      8,600            11,202
         Inventory                                                                              16,694            23,080
         Refundable income taxes                                                                 1,188             2,419
         Prepaid expenses and other current assets                                               5,012             4,427
                                                                                            ----------        ----------
                  TOTAL CURRENT ASSETS                                                         103,425           118,822
                                                                                            ----------        ----------

PROPERTY, PLANT AND EQUIPMENT, NET                                                              56,877            54,835
                                                                                            ----------        ----------

OTHER ASSETS
         Goodwill, net of accumulated amortization of $3,900 in 1999 and $2,781
            in 1998                                                                             32,690            30,767
         Deferred income taxes                                                                  17,879             9,464
         Notes receivable                                                                       16,969            17,504
         Investments                                                                             4,519            13,855
         Other assets                                                                            4,565             5,136
                                                                                            ----------        ----------
                  TOTAL OTHER ASSETS                                                            76,622            76,726
                                                                                            ----------        ----------

                  TOTAL ASSETS                                                              $  236,924        $  250,383
                                                                                            ==========        ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES
         Accounts payable and accrued liabilities                                           $   39,424        $   32,584
         Line of credit                                                                         18,003                --
         Current portion of long-term debt                                                         789               630
         Income tax payable                                                                        638             1,334
         Billings in excess of costs and estimated earnings                                      8,441             3,834
                                                                                            ----------        ----------
                  TOTAL CURRENT LIABILITIES                                                     67,295            38,382
                                                                                            ----------        ----------

LONG-TERM LIABILITIES
         Senior notes                                                                          117,300           118,000
         Long-term debt                                                                          3,706             2,689
         Other liabilities                                                                       2,699             1,074
                                                                                            ----------        ----------
                  TOTAL LONG-TERM LIABILITIES                                                  123,705           121,763
                                                                                            ----------        ----------

                  TOTAL LIABILITIES                                                            191,000           160,145
                                                                                            ----------        ----------

SHAREHOLDERS' EQUITY
         Share capital                                                                          90,450            89,854
         Contributed surplus                                                                     2,845             2,845
         Cumulative foreign exchange                                                            (1,109)           (2,470)
         Retained earnings (accumulated deficit)                                               (46,262)                9
                                                                                            ----------        ----------
                  TOTAL SHAREHOLDERS' EQUITY                                                    45,924            90,238
                                                                                            ----------        ----------

                  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $  236,924        $  250,383
                                                                                            ==========        ==========
</TABLE>

        The accompanying notes are an integral part of these Consolidated
                             Financial Statements.

                                       25

<PAGE>   26


                            AMERICAN ECO CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                   FOR THE THREE YEARS ENDED NOVEMBER 30, 1999
          (United States Dollars in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                                   1999              1998              1997
                                                                                ----------        ----------        ----------

<S>                                                                             <C>               <C>               <C>
REVENUE                                                                         $  258,077        $  276,489        $  194,157
                                                                                ----------        ----------        ----------

COSTS AND EXPENSES
      Direct costs of revenue                                                      224,942           236,152           144,383
      Selling, general and administrative expenses                                  29,511            34,747            25,634
      Asset impairment, litigation, and other                                       29,312            27,479                --
      Depreciation and amortization                                                  5,822             4,724             5,038
                                                                                ----------        ----------        ----------
      Total operating costs                                                        289,587           303,102           175,055
                                                                                ----------        ----------        ----------

OPERATING EARNINGS (LOSS)                                                          (31,510)          (26,613)           19,102

OTHER INCOME (EXPENSE)
      Interest expense, net                                                        (11,387)           (9,166)           (4,770)
      Other, net                                                                        --            (1,498)            3,239
                                                                                ----------        ----------        ----------
      Total other income (expense)                                                 (11,387)          (10,664)           (1,531)
                                                                                ----------        ----------        ----------

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                     (42,897)          (37,277)           17,571

INCOME TAX PROVISION (BENEFIT)                                                        (890)           (8,795)            1,254
                                                                                ----------        ----------        ----------

EARNINGS (LOSS) FROM CONTINUING OPERATIONS                                         (42,007)          (28,482)           16,317

EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS,
      NET OF INCOME TAX PROVISION (BENEFIT) OF ($2,211),
      ($911), AND $576                                                              (4,264)           (1,697)            1,118
                                                                                ----------        ----------        ----------

NET EARNINGS (LOSS)                                                             $  (46,271)       $  (30,179)       $   17,435
                                                                                ==========        ==========        ==========

EARNINGS (LOSS) PER COMMON SHARE
BASIC EARNINGS (LOSS) PER COMMON SHARE
      Earnings (loss) from continuing operations                                $    (1.93)       $    (1.36)       $     1.01
      Earnings (loss) from discontinued operations                                   (0.19)            (0.08)             0.07
                                                                                ----------        ----------        ----------
      Net earnings (loss) per common share                                      $    (2.12)       $    (1.44)       $     1.08
                                                                                ==========        ==========        ==========

ADJUSTED BASIC EARNINGS (LOSS) PER COMMON SHARE
      Earnings (loss) from continuing operations                                $    (1.93)       $    (1.36)       $     0.97
      Earnings (loss) from discontinued operations                                   (0.19)            (0.08)             0.06
                                                                                ----------        ----------        ----------
      Net earnings (loss) per common share                                      $    (2.12)       $    (1.44)       $     1.03
                                                                                ==========        ==========        ==========

FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE
      Earnings (loss) from continuing operations:                               $    (1.93)       $    (1.36)       $     0.80
      Earnings (loss) from discontinued operations                                   (0.19)            (0.08)             0.10
                                                                                ----------        ----------        ----------
      Net earnings (loss) per common share                                      $    (2.12)       $    (1.44)       $     0.90
                                                                                ==========        ==========        ==========

WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTING EARNINGS
      (LOSS) PER COMMON SHARE
      Basic                                                                         21,787            20,965            16,218
                                                                                ==========        ==========        ==========
      Adjusted basic                                                                21,787            20,965            17,668
                                                                                ==========        ==========        ==========
      Fully diluted                                                                 21,787            20,965            21,810
                                                                                ==========        ==========        ==========
</TABLE>

        The accompanying notes are an integral part of these Consolidated
                             Financial Statements.

                                       26

<PAGE>   27


                            AMERICAN ECO CORPORATION
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                   FOR THE THREE YEARS ENDED NOVEMBER 30, 1999
                      (United States Dollars in thousands)

<TABLE>
<CAPTION>
                                            Shares Capital                  Share                              Cumulative
                                     -----------------------------         Capital          Contributed         Foreign
                                       Shares             Amount          Subscribed           Surplus          Currency
                                     ----------        -----------        -----------        -----------       -----------

<S>                                  <C>               <C>                <C>                <C>               <C>
Balance, November 30, 1996           14,217,436        $    39,411        $        34        $     2,845       $        --

Conversion of debentures              3,126,366             21,150
Issued for acquisitions               1,010,913              8,570
Issued for notes                        811,260              7,784
Issued for cash                         376,575              1,613
Issued for services                      66,530                578
Share issue cost                                            (3,563)
Cumulative foreign exchange                                                                                         (1,511)
Subscriptions collected                  20,000                 34                (34)
Net earnings
                                     ----------        -----------        -----------        -----------       -----------
Balance, November 30, 1997           19,629,080             75,577                 --              2,845            (1,511)

Issued for prior acquisitions           138,856              1,526
Issued for asset acquisitions         1,122,142              9,220
Issued for cash                         320,933              1,470
Issued for services                     157,500                700
Issued for warrants                     241,667              1,450
Share issue cost                                               (89)
Cumulative foreign exchange                                                                                           (959)
Net loss
                                     ----------        -----------        -----------        -----------       -----------
Balance, November 30, 1998           21,610,178             89,854                 --              2,845            (2,470)

Issued for acquisitions                 250,214                500
Issued for services                     100,000                 96
Cumulative foreign exchange                                                                                          1,361
Net loss
                                     ----------        -----------        -----------        -----------       -----------
Balance, November 30, 1999           21,960,392        $    90,450        $        --        $     2,845       $    (1,109)
                                     ==========        ===========        ===========        ===========       ===========

<CAPTION>
                                        Retained
                                        Earnings             Total
                                      (Accumulated       Shareholders'
                                         Deficit)            Equity
                                       -----------       -------------

<S>                                    <C>                <C>
Balance, November 30, 1996             $    12,753        $    55,043

Conversion of debentures                                       21,150
Issued for acquisitions                                         8,570
Issued for notes                                                7,784
Issued for cash                                                 1,613
Issued for services                                               578
Share issue cost                                               (3,563)
Cumulative foreign exchange                                    (1,511)
Subscriptions collected                                            --
Net earnings                                17,435             17,435
                                       -----------        -----------
Balance, November 30, 1997                  30,188            107,099

Issued for prior acquisitions                                   1,526
Issued for asset acquisitions                                   9,220
Issued for cash                                                 1,470
Issued for services                                               700
Issued for warrants                                             1,450
Share issue cost                                                  (89)
Cumulative foreign exchange                                      (959)
Net loss                                   (30,179)           (30,179)
                                       -----------        -----------
Balance, November 30, 1998                       9             90,238

Issued for acquisitions                                           500
Issued for services                                                96
Cumulative foreign exchange                                     1,361
Net loss                                   (46,271)           (46,271)
                                       -----------        -----------
Balance, November 30, 1999             $   (46,262)       $    45,924
                                       ===========        ===========
</TABLE>

        The accompanying notes are an integral part of these Consolidated
                             Financial Statements.

                                       27

<PAGE>   28


                            AMERICAN ECO CORPORATION
             CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
                   FOR THE THREE YEARS ENDED NOVEMBER 30, 1999
                      (United States Dollars in thousands)

<TABLE>
<CAPTION>
                                                                            1999              1998              1997
                                                                         ----------        ----------        ----------

<S>                                                                      <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net earnings (loss)                                                     $  (46,271)       $  (30,179)       $   17,435
      Adjustments to reconcile net earnings (loss) to net cash
      provided by operating activities:
          Asset impairment, litigation, and other                            29,312            27,140                --
          Loss on early extinguishment of debt                                   --             2,400                --
          Gain on repurchase of senior notes                                   (280)             (570)               --
          Gain on sale of assets and subsidiaries                                --                --            (2,682)
          Depreciation and amortization                                       5,822             4,916             5,382
          Change in deferred income taxes                                    (4,524)           (7,287)            1,829
          Noncash income, net                                                    --                --               325
          Change in accounts receivable                                      (6,170)             (444)          (15,932)
          Change in refundable income taxes                                   1,231            (2,419)               --
          Change in notes receivable                                             --             3,549           (14,000)
          Change in costs and estimated earnings in excess of
              billings                                                          998             1,943            (7,824)
          Change in inventory                                                 1,376            (5,001)              106
          Change in other assets and liabilities                             (5,230)           (2,523)            1,424
          Change in accounts payable                                        (17,940)            4,185            (4,523)
          Change in billings in excess of costs and estimated
             earnings                                                         1,381               484              (458)
                                                                         ----------        ----------        ----------
 Net cash used in operating activities                                      (40,295)           (3,806)          (18,918)
                                                                         ----------        ----------        ----------

 CASH FLOWS FROM INVESTING ACTIVITIES:
      Proceeds from (disbursements for) notes receivable                     13,384             4,955            (1,098)
      Capital expenditures                                                   (3,338)          (11,794)           (3,134)
      Proceeds from sale of assets                                            3,282                --             3,448
      Acquisition of business, net of cash received                           3,169                --           (10,493)
      Increase in minority interest                                             339                --                --
      Increase in investments                                                (3,800)          (16,450)           (1,277)
                                                                         ----------        ----------        ----------
 Net cash provided by (used in) investing activities                         13,036           (23,289)          (12,554)
                                                                         ----------        ----------        ----------

 CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from senior notes                                                 --           116,139                --
      Proceeds from line of credit                                           18,003                --                --
      Proceeds from notes payable                                                --             5,700            33,500
      Proceeds from long-term debt                                              164               498            58,500
      Principal payments on notes payable                                        --           (14,604)          (53,196)
      Principal payments on long-term debt                                   (8,190)          (59,068)           (7,607)
      Proceeds from sales/leaseback                                              --                --             4,000
      Repurchase of senior notes                                               (420)           (1,430)               --
      Debt issuance costs                                                        --                --            (1,917)
      Stock issuance costs                                                       --               (89)           (2,479)
      Issuance of common stock                                                   --             1,470             1,613
                                                                         ----------        ----------        ----------
 Net cash provided by financing activities                                    9,557            48,616            32,414
                                                                         ----------        ----------        ----------

 EFFECT OF FOREIGN EXCHANGE FLUCTUATIONS ON CASH                              1,361              (959)               --
                                                                         ----------        ----------        ----------

 NET INCREASE (DECREASE) IN CASH                                            (16,341)           20,562               942

 CASH AT BEGINNING OF YEAR                                                   21,821             1,259               317
                                                                         ----------        ----------        ----------
 CASH AT END OF YEAR                                                     $    5,480        $   21,821        $    1,259
                                                                         ==========        ==========        ==========
Supplemental Disclosures of Cash Flow Information
 Cash paid during the years for:
      Interest                                                           $   12,362        $    9,548        $    4,718
      Income taxes                                                       $    1,285        $    1,810        $      281
</TABLE>

        The accompanying notes are an integral part of these Consolidated
                             Financial Statements.

                                       28

<PAGE>   29


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)

American Eco Corporation and its subsidiaries ("the Company" or "AEC") provide
industrial outsourcing services, environmental, and construction management
services to the energy, pulp and paper, power generation, and retail industries.

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Consolidated Financial Statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP"). The
differences between Canadian and United States GAAP are described in Note 19.

The accompanying Consolidated Financial Statements include the Company and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

Revenue Recognition - The Company recognizes revenues and profits on fixed price
contracts using the percentage-of-completion method. Under the
percentage-of-completion method, contract revenues are accrued based upon the
percentage that accrued costs to date bear to total estimated costs. As
contracts can extend over more than one accounting period, revisions in
estimated total costs and profits during the course of work are reflected during
the period in which the facts requiring the revisions become known. Losses on
contracts are charged to income in the period in which such losses are first
determined.

Inventory - Inventory is valued on the lower of cost or market method, with cost
determined on the first-in, first-out method.

Property, Plant and Equipment - Property and equipment are stated at cost.
Expenditures for additions, major renewals and betterments are capitalized and
expenditures for maintenance and repairs are charged to earnings as incurred.
When property and equipment are retired or otherwise disposed of, the cost
thereof and the applicable accumulated depreciation are removed from the
respective accounts and the resulting gain or loss is reflected in earnings.
Depreciation and amortization are provided over the estimated useful lives of
the respective assets using the straight-line method based on their estimated
useful lives.

Goodwill - The cost in excess of the fair value of the net assets of businesses
acquired at their respective acquisition dates are amortized on a straight-line
basis over 40 years. The Company regularly assesses the carrying value in order
to determine whether an impairment has occurred, taking into account both
historical and forecasted results of operations.

Income Taxes - Effective November 1, 1998, the Company changed its method of
accounting for income taxes to CICA 3465, "Income Taxes." Under CICA 3465,
deferred future income taxes are provided on an asset and liability method
whereby deferred future income tax assets are recognized for deductible
temporary differences and operating loss or tax credit carryforwards, and
deferred income tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the amounts of
assets and liabilities recorded for income tax and financial reporting purposes.
Deferred future income tax assets are recognized only to the extent that
management determines that it is more likely than not that the deferred future
income tax asset will be realized.

Previously, income taxes were provided on a tax allocation basis whereby the
provision was based on accounting income and deferred income taxes resulted from
temporary differences which arose between accounting income and taxable income.

Other Assets - Included in other assets is approximately $4,000 and $4,500 in
1999 and 1998, respectively, of debt issuance costs which are being amortized
over the term of the debt (10 years).

Per Share Data - Basic earnings (loss) per share has been calculated on the
basis of net earnings for the year divided by the weighted average number of
common shares outstanding during the period. Adjusted basic earnings (loss) per
share has been calculated assuming the actual debt conversion occurring during
the year had taken place at the beginning of the year, or at the date of
issuance if issued during the year. Fully diluted earnings (loss) per share
additionally assumes all options and warrants have been exercised at the later
of the beginning of the fiscal period or the option issue date. For fiscal year
1999, 3,153 options and 2,899 warrants have been excluded as their impact would
have been anti-dilutive.

Translation of Financial Statements into United States Dollars - The
Consolidated Financial Statements are expressed in United States dollars using
foreign currency translation procedures established by the Canadian Institute of
Chartered Accountants.

                                       29

<PAGE>   30


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
   CONTINUED

For self-sustaining operations, the assets and liabilities denominated in a
foreign currency are translated at exchange rates in effect at the balance sheet
date. The resulting gains and losses are accumulated in a separate component of
shareholders' equity. Revenues and expenses are translated at average exchange
rates prevailing during the period. For integrated purposes current assets,
current liabilities and long-term debt are translated into United States dollars
using year end rates of exchange; all other assets and liabilities are
translated at applicable historical rates of exchange. Revenues, expenses and
certain costs are translated at annual average exchange rates except for
inventory, depreciation and amortization which are translated at historical
rates. Realized exchange gains and losses and currency translation adjustments
relative to long-term monetary items with a fixed and ascertainable life are
deferred and amortized on a straight-line basis over the life of the item.

Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassifications - Certain amounts from prior years have been reclassified to
conform to the current year's presentation.

2. SIGNIFICANT BUSINESS COMBINATIONS

1997

Effective February 28, 1997, the Company acquired all of the outstanding common
stock of Chempower, Inc. ("Chempower"). All of the stockholders of Chempower,
other than two principal stockholders (the "Principal Stockholders") received
$6.20 in cash for each of their Chempower shares. The Principal Stockholders
received a portion of their consideration in cash and the balance was
represented by a $15,900 promissory note paid in August 1997. Based upon a total
of approximately 7,600 Chempower shares outstanding, the total acquisition cost
was approximately $50,000, including acquisition costs of approximately $3,000.
The acquisition was partially funded by a placement by the Company of $15,000,
9.5%, 10-year Convertible Debentures. Concurrent with the Chempower acquisition,
the Company entered into installment purchase agreements with Holiday
Properties, a general partnership owned by the Principal Stockholders. These
agreements provided for the acquisition of three parcels of real property which
had been leased to Chempower. The aggregate purchase price for the three
properties amounted to $4,500, of which $500 was paid on February 28, 1997. The
purchase price and expenses associated with the acquisition exceed the fair
value of net assets acquired by approximately $12,000.

Effective September 1, 1997, the Company acquired all of the outstanding common
stock of Specialty Management Group Inc. d/b/a/ CCG ("CCG"), in exchange for 265
shares of Company common stock with a fair market value of approximately $2,600.
The aggregate purchase price and expenses associated with the acquisition exceed
the fair value of net assets acquired by approximately $3,600.

3. IMPAIRMENT, LITIGATION AND OTHER CHARGES

During 1999, the Company recorded certain asset impairment, litigation, and
other charges that management believes are not reflective of the Company's core
or on-going business activities and are viewed by management as non-recurring.
The total expense is $29,312 and the major components are listed as follows: 1)
Write-off of UKstar (Canada) Inc. ("UKstar") note receivable $8,029; 2)
capitalized lease-hold improvements $473; 3) inventory write-down $500; 4)
litigation charges of $13,798 including charges related to the
Petrodrill/Amethyst contract of $10,927, and a reserve placed for settlement of
the U.S. Attorney v. ACI proceeding (see Note 21), 5) failed acquisition costs
primarily related to U.S. Industrial Services, Inc. ("USIS") of $1,018, and 6)
severance and miscellaneous other asset impairments of $5,494.

During 1998, the Company recorded charges related primarily to certain
investments in Dominion Bridge Corporation ("Dominion Bridge") and certain of
its subsidiaries all of which filed under the Canadian Bankruptcy and Insolvency
Act in August 1998 (see Note 5), an impairment in its investment in USIS (see
Note 6), and severance costs of $3,200 relating primarily to changes in certain
senior management positions both at the corporate offices and at certain
subsidiaries.

                                       30

<PAGE>   31


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


4. NOTES RECEIVABLE

<TABLE>
<CAPTION>
                                                                                        1999             1998
                                                                                       -------          -------

 <S>                                                                                   <C>              <C>
 George E. Phillips Holdings, Ltd., $2,800 due and paid in January 1998,
 quarterly payments of $446 from February 1998 through August 2002, with final
 payments due in November 2002, interest at 10% collateralized by 50% of the
 issued and outstanding shares of common stock of Mid Atlantic Recycling
 Technologies, Inc. ("MART"). See Note 24.                                             $11,034          $11,034

 Kenny Industrial Services, L.L.C., due at various dates through November 2002,
 interest at 5%, collateralized by assets sold.                                          5,000               --

 American Temporary Sanitation, Inc., $1,330 note presented net of unrecognized
 gain of $776, interest at prime rate +2.5%, due in quarterly installments of
 $72, collateralized by assets sold.                                                       554               --

 UKstar, $9,300 note presented net of unrecognized interest income of $1,300, due
 September 2000, with quarterly interest installments of $227 interest at 9.75%,
 collateralized by 2,000 common shares of ETI and a $3,000 performance bond. This
 note was written off in fiscal 1999 and the Company is pursuing all
 rights and remedies against this collateral.                                               --            8,029

 Receivables from joint ventures. See Note 7.                                            2,740            3,002

 Notes receivable from officers and directors. See Note 15.
                                                                                         1,049            1,213

 Miscellaneous notes receivable                                                          1,285              742
                                                                                       -------          -------
                                                                                        21,662           24,020
 Less reserve for notes receivable                                                        (427)          (1,436)
                                                                                       -------          -------
 Total notes receivable                                                                 21,235           22,584
 Current portion                                                                         4,266            5,080
                                                                                       -------          -------
 Long-term portion                                                                     $16,969          $17,504
                                                                                       =======          =======
</TABLE>

5. DOMINION BRIDGE CORPORATION

On February 20, 1998, the Company and Dominion Bridge entered into a non-binding
Letter of Intent which provided for (a) the purchase of $5,000 of Dominion
Bridge common stock and warrants to purchase Dominion Bridge common stock by the
Company, (b) a working capital loan facility of up to $25,000 to be provided by
the Company to Dominion Bridge, (c) the engagement of the Company to provide
certain management services to Dominion Bridge and (d) the acquisition by the
Company of the business and assets of Dominion Bridge. The purchase of $5,000
dollars of Dominion Bridge stock was consummated on February 20, 1998, the
President and Chief Executive Officer of the Company also became a member of the
Board of Directors of Dominion Bridge. On March 23, 1998, the Company announced
that it had withdrawn the Letter of Intent and terminated negotiations for any
further transactions. The Company subsequently entered into two projects with
Davie Industries and Steen Pipeline, subsidiaries of Dominion Bridge, to perform
certain contract work in Canada. The Company subsequently acquired Dominion
Bridge's interest in the Steen Pipeline transaction for an additional $1,600.

Dominion Bridge filed under the Canadian Bankruptcy and Insolvency Act. During
the fourth quarter of fiscal 1998, the Company, after reviewing its prospects
for recovery of its investments in Dominion Bridge, determined that it was
probable that a recovery of its investment would not occur. As a result, during
the fourth quarter, the Company recorded a charge of approximately $13,800. This
amount includes primarily the Company's initial $5,000 investments in Dominion
Bridge, costs associated with the Company's investment in Dominion Bridge and
amounts advanced to Dominion Bridge during 1998, primarily relating to the two
joint projects with Davie Industries and Steen Pipeline.

                                       31

<PAGE>   32


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


6. U. S. INDUSTRIAL SERVICES, INC.

During June 1996, the Company purchased 4,600 shares of USIS common stock for
$2,800. On November 7, 1996, the Company acquired an additional 200 shares of
USIS common stock through the issuance of 25 shares of its common stock, and on
November 20, 1996, the Company purchased 4,000 shares of USIS in exchange for
$70 and 300 shares of the Company's common stock. At November 30, 1996, the
Company's total investment in USIS was approximately $5,200 and represented 36%
of USIS's total common stock. Additionally during 1996, the Company entered into
a Stock Purchase Agreement with USIS whereby the Company had an option to
purchase 10,000 shares of USIS for $1,000. This option was subject to USIS
stockholders increasing the authorized number of common shares. The Company
accounted for its investment in USIS pursuant to the equity method of accounting
commencing January 1, 1997. These shares were converted to 880 shares when a 1
for 10 reverse split was consummated in June 1998.

In February 1996, the Company agreed to loan money to USIS pursuant to a line of
credit agreement with a maximum borrowing of $5,200. This line of credit was not
collateralized and was due on July 31, 1997. Effective July 31, 1997, the line
of credit was renewed, extended and modified to increase the maximum borrowing
amount to $15,000 and extend the maturity to February 18, 1998. On September 30,
1997, the Company increased the maximum borrowing amount to $20,000. This
renewal included an option for the Company to convert the entire indebtedness
into common shares of USIS at 85% of the average market price of the previous
five days, subject to approval of an increase in the number of authorized shares
by USIS's stockholders. On February 18, 1998, the Company extended the maturity
date of the line of credit to August 18, 1998. As of November 30, 1997, the
total receivable from USIS was $17,900, which included accrued interest of
$1,040. The Company received interest income of $800 related to the loan
outstanding during 1997.

On November 19, 1997, USIS completed its acquisition of JL Manta, Inc.
("Manta"), an Illinois corporation which provided specialized maintenance
services for clients in the industrial, environmental and low-level nuclear
sectors. Pursuant to the terms of a Stock Purchase Agreement, USIS acquired all
of the issued and outstanding common stock of Manta for consideration of $4,700
in cash and $2,200 in convertible promissory notes of USIS, payable in
installments with a final payment due on November 18, 2000 (the "Stockholder
Notes").

USIS gave effect to a one-for-ten reverse split of its shares in June 1998, and
a reincorporation which was approved by stockholders in May 1998. The Company
held certain promissory notes of USIS consisting of principal and interest in
the aggregate of $18,900. The notes were reduced by $1,000 representing the
purchase price by the Company for 1,000 shares purchased under the February 1996
Stock Purchase Agreement. The Company sold the remaining portion of the notes to
USIS Acquisition, L.L.C. ("UALC"), an unrelated entity, for $5,000 in cash and a
secured promissory note for $12,900 payable on January 29, 1999. UALC converted
the notes into 5,296 shares of USIS common stock and secured its promissory note
to the Company with a pledge of all acquired shares. In November 1998, UALC
advised the Company that UALC would be unable to pay its note at maturity, and
the Company took ownership of the pledged shares in discharge of the note. As a
result of the transaction, the Company's ownership interest increased from 21%
to 82% of the outstanding common stock of USIS at November 30, 1998 and is
included in these Consolidated Financial Statements.

In November 1998, USIS sold the assets of Manta and transferred related
liabilities, including the credit facility, to Kenny Industrial Services,
L.L.C., for $23,000 consisting of a combination of cash and notes. At this time,
the name was changed to Atnam, Inc.

On December 31, 1998, USIS sold the assets of P.W. Stephens Residential Inc. and
transferred its liabilities, to American Temporary Sanitation Inc. for $2,400
consisting of $1,004 in cash and a five year promissory note for $1,396 payable
quarterly through 2004, together with interest at prime rate plus 2.5% per
annum. Recognition of the gain on this sale has been deferred and is presented
as a reduction of the note balance.

Primarily as a result of UALC defaulting on the note payable to the Company and
the fees incurred by USIS in their sale of Manta, the Company recognized an
impairment in fiscal year 1998 in its net investment in USIS of $7,000.

The results of USIS' operations have been consolidated commencing in fiscal year
1999. USIS' fiscal year ends on September 30, which results have been
consolidated as of November 30, 1999.

                                       32

<PAGE>   33


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


7. INVESTMENT IN SEPARATION AND RECOVERY SYSTEMS, INC. JOINT VENTURES

The Company, through its wholly owned subsidiary Separation and Recovery
Systems, Inc. ("SRS"), participate in three joint ventures with equity interests
ranging from 33% to 50%. Each of these joint ventures is involved in operating
SRS' waste treatment equipment.

At November 30, 1999, the Company's total investment in these joint ventures was
approximately $2,300 and the Company had receivables from the joint ventures of
approximately $2,700. At November 30, 1998, the Company's total investment in
these joint ventures was approximately $1,200 and the Company had receivables
from the joint ventures of approximately $3,000. During 1999, the Company
recognized $800 of income related to these joint ventures. During 1998, the
Company sold and leased certain equipment to the joint ventures for
approximately $2,300. During 1997, the Company sold and leased certain equipment
to the joint ventures in the amount of approximately $5,000. The Company
deferred profit on transactions with the joint ventures to the extent of its
ownership interests in the amounts of approximately $300 and $1,600 in 1998 and
1997, respectively.

The results of operations and financial position of these joint ventures are not
material to the Company's financial position and results of operations as of
November 30, 1999 and 1998.

8. INVENTORY

<TABLE>
<CAPTION>
The components of inventory are as follows:              1999          1998
                                                        -------       -------
<S>                                                     <C>           <C>
         Raw material                                   $ 4,024       $ 8,388
         Consumable supplies                              3,127         4,207
         Finished goods                                   9,543        10,485
                                                        -------       -------
         Total Inventory                                $16,694       $23,080
                                                        =======       =======
</TABLE>

9. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
Property, plant and equipment consists of the following:        1999          1998
                                                               -------       -------

<S>                                                            <C>           <C>
Land                                                           $ 9,896       $11,223
Buildings                                                       22,749        20,831
Fabrication, machinery, mobile and other equipment              29,502        27,693
Furniture and fixtures                                           5,466         2,634
Buildings and equipment under capital leases                     3,226         4,448
Leasehold improvements                                           2,347         1,451
                                                               -------       -------
                                                                73,186        68,280
Accumulated depreciation and amortization                       16,309        13,445
                                                               -------       -------
                                                               $56,877       $54,835
                                                               =======       =======
</TABLE>

Depreciation expense for the years ended November 30, 1999, 1998, and 1997 was
$4,679, $3,673, and $4,467, respectively.

10. LINE OF CREDIT

In May 1999, the Company and its principal subsidiaries entered into a Credit
Agreement with General Electric Capital Corporation as lender and agent for
additional lenders. The Credit Agreement as amended provides for a
collateralized revolving credit facility (the "Revolver") of up to $30,000 to be
used for working capital and other general corporate purposes and is based upon
certain eligible accounts receivable. The Revolver has a two-year term, subject
to two automatic one year extensions at the mutual discretion of the Company and
the lenders. Borrowings under the Revolver accrue interest at a rate equal to 4%
above the commercial paper rate, (9.3% at November 30, 1999). Interest is
payable monthly. The revolver is collateralized by the Company's accounts
receivables and inventory, and most of the owned properties are mortgaged as
security. The total availability based on eligible collateral was $7,500 at
November 30, 1999. The Company was in violation of its tangible net book value
covenant at November 30, 1999 which has since been amended and the Company is
currently in compliance with all debt covenants.


                                       33

<PAGE>   34


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


<TABLE>
<CAPTION>
11.  LONG-TERM DEBT INCLUDING CAPITAL LEASES                                                1999           1998
                                                                                           -------        -------

<S>                                                                                        <C>            <C>
Capital lease obligation to Sunnybank Property Ltd., payable $22 monthly with
an implicit rate of 11.44% with final payments due October 31, 2018                        $ 2,029        $ 2,061

Notes payable, other                                                                         2,466          1,258
                                                                                           -------        -------
                                                                                             4,495          3,319
Current portion                                                                                789            630
                                                                                           -------        -------
Long-term portion                                                                          $ 3,706        $ 2,689
                                                                                           =======        =======
</TABLE>

The aggregate principal payments on long-term debt during the years subsequent
to November 30, 1999 are: 2000 - $789; 2001 - $793; 2002 - $610; 2003 - $293;
2004 - $131; thereafter $1,879.

12. SENIOR NOTES

In May 1998, the Company issued $120,000 of 9 5/8% Senior Notes that mature May
15, 2008. Interest on the Notes is payable semi-annually in arrears on May 15
and November 15 of each year. The Notes are redeemable at the option of the
Company in whole or in part, at any time on or after May 15, 2003, at specified
redemption prices.

The net proceeds from the issuance of the Notes were $116,100. The Company used
proceeds of $71,200 to repay credit facilities, other outstanding indebtedness
and accrued interest associated with such indebtedness.

As a result of the refinancing, the Company recorded a $2,400 charge for the
early extinguishment of debt, primarily related to the prepaid financing costs
of the bank debt. The Company also recorded an asset of $4,500 related to
prepaid financing costs associated with the Notes. This asset is being amortized
over the ten year term of the Notes.

In September 1998, the Company repurchased $2,000 of Senior Notes on the open
market at a discounted price of $1,400. The transaction resulted in a gain of
$600 on the early extinguishment of debt. In June 1999, the Company repurchased
$700 of Senior Notes on the open market at a discounted price of $420. The
transaction resulted in a gain of $280 on the early extinguishment of debt.

13. LEASE AGREEMENTS

The Company leases equipment and office and warehouse space under operating
leases that expire at various times through September 2003. Future minimum
payments, by year and in the aggregate, under these operating leases, consisted
of the following at November 30:

<TABLE>
<S>                                                                                        <C>
       2000                                                                                $1,403
       2001                                                                                 1,072
       2002                                                                                   486
       2003                                                                                    28
       2004                                                                                    --
                                                                                           ------
       Total minimum lease payment                                                         $2,989
                                                                                           ======
</TABLE>

Rent expense for the years ended November 30, 1999, 1998, and 1997 amounted to
$1,198, $1,522, and $634, respectively.

In May 1997, the Company entered into a sales/leaseback transaction with a third
party for machinery and equipment. In conjunction with this transaction, the
Company recorded a deferred gain of $1,200, which is being amortized over the
sixty-month life of the lease.

                                       34

<PAGE>   35


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


14. COSTS AND ESTIMATED EARNINGS ON JOBS IN PROGRESS

Costs, estimated earnings and billings are summarized as follows:

<TABLE>
<CAPTION>
                                                                               1999           1998

<S>                                                                          <C>            <C>
Costs incurred on uncompleted jobs                                           $ 336,418      $ 126,323
Estimated earnings                                                              41,476         13,993
                                                                             ---------      ---------
                                                                               377,894        140,316
Billings to date                                                               377,735        132,948
                                                                             ---------      ---------
                                                                             $     159      $   7,368
                                                                             =========      =========

Included in the accompanying balance sheet under the following captions:

     Costs and estimated earnings in excess of billings                      $   8,600      $  11,202
     Billings in excess of costs and estimated earnings                         (8,441)        (3,834)
                                                                             ---------      ---------
                                                                             $     159      $   7,368
                                                                             =========      =========
</TABLE>

15. RELATED PARTY TRANSACTIONS

Pursuant to an agreement among the Company, Windrush Corporation ("Windrush"),
and J.C. Pennie, dated May 1, 1999, Windrush received a fee of $20 per month in
consideration for executive services for administration, strategic and marketing
planning provided to the Company and is eligible for annual profit participation
based upon levels of the Company's earnings per share. This agreement expires on
May 1, 2004, and has a five-year renewable term and is subject to a five year
payment upon a change in control. J.C. Pennie, the Chairman of the Board of
Directors of the Company, is President of Windrush. Windrush also received a
one-time payment of $145 for consulting services related to unsuccessful
acquisitions. The previous agreement paid Windrush a monthly fee of $10 from
November 1998 to May 1999.

As of August 31, 1997, the Company sold its subsidiaries Eco Environmental, Inc.
("Eco Environmental") and Environmental Evolutions to Eurostar Interests Ltd.
("Eurostar") for an aggregate purchase price of $11,000 payable in a one-year
promissory note (the "Eco Note"), which was to be collateralized by all of the
capital stock of Eurostar. Eurostar assigned its interest in Eco Environmental
and Environmental Evolutions to UKstar, which in turn transferred its interest
in Eco Environmental and Environmental Evolutions to Eco Technologies
International Inc. ("ETI"), a Canadian company. UKstar owns 85.5% of ETI.
Windrush owns 1.6% of ETI. Mr. Pennie also served as the Secretary of UKstar and
as the Chairman of ETI, and Barry Cracower, a director of the Company, also
served as a director of ETI until they resigned on March 30, 1999. In February
1998, UKstar paid $603 to the Company for reimbursement of monies advanced by
the Company for the operating expenses of Eco Environmental and Environmental
Evolutions from September 30, 1997 to November 30, 1997. In October 1998, UKstar
paid $3,000 on the Eco Note, and is to repay the remaining $9,314 on September
30, 2000 with quarterly interest installments of $227, which obligations are
collateralized by 2,000 shares of ETI Common Stock and a $3,000 performance
bond. The Company has made a claim on the $3,000 bond and has placed Ukstar
under demand for payment. The Company has written off the entire note balance,
but will continue to pursue all rights and remedies to collect all amounts owed.

In July 1998, Industra Service entered into a 15-year lease for an office, shop
and warehouse in Edmonton, Alberta from Sunnybank Property Ltd., a company in
which Honorable Donald R. Getty, a director of the Company, is President and has
a 25% interest. The annual lease payments are $320. Management believes the
lease terms are at commercially reasonable rates.

In June 1999, the Company entered into an agreement with Honorable Donald R.
Getty, a director of the Company, to provide consultant services to help the
Company identify upcoming projects and introduce it to prospective clients. The
agreement expires in 12 months and the fee is $5 per month.

In August 1998, the Board of Directors authorized the Company to loan up to $100
to each Director for the purpose of using the proceeds to purchase the Company's
Common Shares in the open market. These loans are to be repaid in three years,
bear interest at the rate of 9-5/8% per annum, and are unsecured. Messrs.
Fradella, a former Director and officer, Getty and Pennie each took a loan for
$100 and Mr. Cracower took a loan for $50. As of November 30, 1999, the
following Director loans were outstanding: Mr. Fradella - $112, Mr. Getty -
$112, Mr. Pennie - $84 and Mr. Cracower - $20.

                                       35

<PAGE>   36


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


15. RELATED PARTY TRANSACTIONS - CONTINUED

During fiscal 1997, the Company loaned $84 to Michael E. McGinnis, a director
and executive officer of the Company, for the purpose of purchasing Common
Shares of the Company in the open market. The loan increased his indebtedness to
the Company to $630. The loan was to mature on May 7, 1998, and the maturity was
extended to May 31, 2001, bearing interest at the rate of 10.0% per annum. The
outstanding balance of the loan, including interest, as of November 30, 1999 was
$725.

In May 1997, the Company loaned $305 at 8.5% interest per annum to David L.
Norris, former executive officer, for the purchase of a home in connection with
his relocation to the Company's headquarters in Houston, Texas. The loan was to
mature in May 1998 and was extended to February 1, 2003, and is unsecured. The
outstanding balance of the loan, including interest, as of November 30, 1999 was
$326.

In September 1998, the Company loaned $100 to Besim Halef, an executive officer,
repayable over three years, together with interest at the rate of 6% per annum.
The outstanding balance of the loan, including interest, as of November 30, 1999
was $107.

16. INCOME TAXES

CANADA

Income tax expense varies from the amount that would be computed by applying the
basic combined Canadian federal and provincial rate of 45.31%, as follows:

<TABLE>
<CAPTION>
                                                                           1999            1998            1997
                                                                         --------        --------        --------

<S>                                                                      <C>             <C>             <C>
Basic rate applied to pre-tax income                                     $(21,761)       $(18,072)       $  8,542
Reduction due to income taxes in other jurisdictions                        1,998           4,624          (5,316)
Increase in valuation allowance                                            17,663           5,648              --
Other                                                                          --             183            (247)
Reduction of income taxes due to application of loss carryforwards             --              --          (2,507)
                                                                         --------        --------        --------
Effective Canadian tax expense                                           $ (2,100)       $ (7,617)       $    472
                                                                         ========        ========        ========
</TABLE>

The Company has Canadian non-capital income tax losses available to be carried
forward in the amount of $57,139 expiring through 2006. The Company also has
capital losses available to be carried forward indefinitely in the amount of
$5,000.

UNITED STATES

The components of the provision for (recovery of) income taxes are as follows:

<TABLE>
<CAPTION>
                                                                          1999           1998           1997
                                                                         -------        -------        -------

<S>                                                                      <C>            <C>            <C>
Federal                                                                  $ 1,069        $  (996)       $ 3,547
State                                                                        141           (182)           314
Reduction of income taxes due to application of loss carryforwards            --             --         (1,701)
Benefits from previously unrecorded tax items                                 --             --         (1,529)
Other                                                                         --             --            151
                                                                         -------        -------        -------
                                                                         $ 1,210        $(1,178)       $   782
                                                                         =======        =======        =======
</TABLE>

The Company has income tax losses generated by its subsidiaries in the United
States available to be carried forward in the amount of $8,529 expiring through
2018.

<TABLE>
<S>                                                                      <C>            <C>            <C>
Total tax expense (benefit) consisting of
     Current                                                             $ 1,423        $(2,419)       $    --
     Deferred                                                             (2,313)        (6,376)         1,254
                                                                         -------        -------        -------
                                                                         $  (890)       $(8,795)       $ 1,254
                                                                         =======        =======        =======
</TABLE>

                                       36

<PAGE>   37


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


16. INCOME TAXES - CONTINUED

Deferred income taxes result from timing differences between the recording of
income for accounting purposes and for income tax purposes and from the
estimated future tax benefit from operating losses when, in the opinion of
management, realization of such benefits is not virtually certain.

The significant components of the net deferred tax assets (liabilities) are as
follows:

<TABLE>
<CAPTION>
                                        1999            1998
                                      --------        --------

<S>                                   <C>             <C>
Depreciation and amortization         $ (5,657)       $(11,360)
Allowance for bad debts                  1,166           2,542
Accrued liabilities                      7,980           4,642
Net operating loss carryforward         65,668          16,200
Investments                             10,668           7,466
Other                                       26            (290)
Deferred income                         (1,503)           (330)
Valuation allowance                    (60,469)         (9,406)
                                      --------        --------
                                      $ 17,879        $  9,464
                                      ========        ========
</TABLE>

During 1998, the Company adopted the provisions of CICA Section 3465, "Income
Taxes." CICA 3465. The Company has elected not to restate prior years and the
impact on the current year is not material. Had the Company restated prior
years, the prior year tax provision would have increased by approximately $1,000
as certain net operating loss carryforwards which were utilized in 1997 would
have been credit to goodwill and not to the income tax provision. Additionally,
goodwill amortization would have been reduced for each of the remaining years of
its useful life. The annual impact is not material to the Company's results of
operations.

17. SHARE CAPITAL

AUTHORIZED SHARE CAPITAL

The authorized share capital consists of unlimited Class A Preference shares and
unlimited, no par value common shares.

SHARE WARRANTS

As of November 30, 1999, the Company had 2,899 outstanding share warrants, which
call for the issuance of one common share upon presentation of the warrant at
issue prices ranging from $2.00 to $9.56. These warrants expire at various times
through September, 2002.

STOCK OPTIONS

In May 1999, the Stockholders amended the Company's 1995 Stock Option Plan (the
"Plan"). Under the Plan, the Company is authorized to issue 4,342 options to
purchase shares.

                                       37

<PAGE>   38


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


17. SHARE CAPITAL - CONTINUED

Information with regard to stock options is as follows:

<TABLE>
<CAPTION>
                                      SHARES    OPTION PRICE RANGE

<S>                                   <C>          <C>
Outstanding, November 30, 1996          553        $1.76-$9.76
Granted                                 994        $6.67-$7.72
Cancelled                              (144)       $1.76-$7.09
Exercised                              (267)       $1.79-$7.72
                                      -----
Outstanding, November 30, 1997        1,136        $1.79-$9.76
Granted                                 716       $6.36-$10.76
Cancelled                              (213)       $3.20-$6.00
Exercised                              (113)       $1.66-$3.20
                                      -----
Outstanding, November 30, 1998        1,526       $1.73-$11.20
Granted                               2,022        $1.19-$1.90
Cancelled                              (395)      $1.49-$11.20
Exercised                                --
                                      -----
Outstanding, November 30, 1999        3,153        $1.19-$7.46
                                      =====
Options current exercisable             976        $1.19-$7.46
                                      =====
</TABLE>

The weighted average fair value of options granted during 1999, 1998, and 1997
were $0.85, $3.59, and $6.42 per share, respectively.

The weighted average exercise price and remaining term as of November 30, 1999
are $3.64 and 3.46 years, respectively.

18. DISCONTINUED OPERATIONS

During the second quarter of fiscal year 1999, management adopted plans to
discontinue the switchgear operations of Chempower and the engineering business
of Industra.

The assets of Chempower's switchgear operations have been liquidated as of
November 30, 1999. Assets of Industra's engineering business will be liquidated
when the business is sold. The net assets of Industra's engineering business are
included in the November 30, 1999 consolidated balance sheet and are summarized
as follows:

<TABLE>
<S>                                              <C>
Accounts receivable, net                         $2,393
Other assets                                        109
                                                 ------
      Total assets                                2,502
                                                 ------
Accounts payable                                    605
Other liabilities                                 5,606
                                                 ------
      Total liabilities                           6,211
                                                 ------
Net liabilities of discontinued operations       $3,709
                                                 ======
</TABLE>

                                       38

<PAGE>   39


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


18. DISCONTINUED OPERATIONS - CONTINUED

Summary operating results for the years ended November 30, 1999, 1998 and 1997
were as follows:

<TABLE>
<CAPTION>
                                                         1999            1998            1997
                                                       --------        --------        --------

<S>                                                    <C>             <C>             <C>
Revenues                                               $ 13,219        $ 23,300        $ 26,321
Operating earnings (loss)                                (6,205)         (2,268)          1,870
Interest expense                                            270             340             176
Earnings (loss) before income taxes                      (6,475)         (2,608)          1,694
Income tax provision (benefit)                           (2,211)           (911)            576
Net earnings (loss) from discontinued operations         (4,264)         (1,697)          1,118
</TABLE>

Operating losses during the phase out period have been included in the loss from
discontinued operations in the accompanying financial statements. Interest
expense has been allocated based on intercompany debt balances.

19. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
    PRINCIPLES AND PRACTICES

The Consolidated Financial Statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian Basis") which
differ in certain respects from those principles and practices that the Company
would have followed had its Consolidated Financial Statements been prepared in
accordance with accounting practices generally accepted in the United States
("U.S. Basis").

During 1998, the Company issued $120,000 in Senior Notes (see Note 12) and used
certain of the proceeds to retire existing indebtedness. As a result, the
Company recorded a charge of $2,400 relating to the early extinguishment of
debt. Under U.S. Basis, such amount would have been presented as an
extraordinary item, net of tax. Additionally, the Company repurchased $700 and
$2,000 face amount of Senior Notes for approximately $420 and $1,430, resulting
in a gain of $420 and $570 in 1999 and 1998, respectively. Under U.S. Basis,
this gain would also be presented as an extraordinary item.

During 1997, the Company sold $18,000 aggregate principal amount of convertible
debentures (the "Debentures"). In connection with these Debentures, the Company
issued approximately 1,700 stock purchase warrants to the holders and as
placement fees to third parties. Under Canadian Basis, the total amount
allocated to the conversion feature was being charged to interest expense over
ten years. All of these Debentures were converted during 1997 and the
unamortized amount of $11,800 was charged to equity. Had the U.S. Basis been
followed, the intrinsic value of the conversion feature of approximately $3,500
would have been charged to interest expense immediately as the Debentures
contained a beneficial conversion feature on the date of issuance.

Under U.S. Basis, utilization of pre-acquisition net operating losses should be
credited to goodwill rather than as a reduction in the income tax provision, as
is practice under Canadian Basis. Therefore, under U.S. Basis, the 1998 income
tax provision would have been adjusted by approximately $1,000.

Switchgear and engineering businesses would not be presented as discontinued
operations under U.S. Basis. See Note 19 for additional amounts which would be
included as continuing operations under U.S. Basis.

                                       39

<PAGE>   40
                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


19. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
    PRINCIPLES AND PRACTICES - CONTINUED

The following is a comparison of net income under Canadian Basis to net income
under U.S. Basis.

<TABLE>
<CAPTION>
                                                                      1999                                      1998
                                                      ---------------------------------         ---------------------------------
                                                      Canadian Basis         U.S. Basis         Canadian Basis         U.S. Basis
                                                      --------------         ----------         --------------         ----------

<S>                                                      <C>                  <C>                  <C>                  <C>
Pre-tax loss                                             $(42,897)            $(49,652)            $(37,277)            $(38,055)
Income tax benefit                                           (890)              (3,207)              (8,795)              (9,011)
                                                         --------             --------             --------             --------
Loss before from continuing operations                    (42,007)             (46,445)             (28,482)             (29,044)
Loss from discontinued operations, net                     (4,264)                  --               (1,697)                  --
Gain (loss) from early extinguishment of debt                  --                  174                   --               (1,135)
                                                         --------             --------             --------             --------
Net loss                                                 $(46,271)            $(46,271)            $(30,179)            $(30,179)
                                                         ========             ========             ========             ========

Net loss per share from continuing
operations - basic                                       $  (1.93)            $  (2.13)            $  (1.36)            $  (1.39)
Loss from discontinued operations                           (0.19)                  --                (0.08)                  --
Gain (loss) from early extinguishment of debt                  --                 0.01                   --                (0.05)
                                                         --------             --------             --------             --------
Net loss                                                 $  (2.12)            $  (2.12)            $  (1.44)            $  (1.44)
                                                         ========             ========             ========             ========
</TABLE>

Under U.S. Basis, primary and fully diluted earnings per share is calculated
using the treasury stock method. The calculation of earnings per share for 1997
under U.S. Basis is as follows:

<TABLE>
<S>                                                                                                                     <C>
    Net earnings                                                                                                        $11,386
    Net earnings per share - Primary                                                                                    $  0.66
    Net earnings per share - Fully diluted                                                                              $  0.65

    Weighted average number of shares
        Primary                                                                                                          17,143
        Fully Diluted                                                                                                    18,784
</TABLE>

SFAS No. 123 "Accounting for Stock Based Compensation," issued in October 1995,
defines a fair value method of accounting for employee stock options. Under this
fair value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the vesting period. SFAS No. 123
allows, and the Company has elected, to continue to measure compensation cost in
accordance with APB No. 25 for purposes of the U.S. to Canadian GAAP
reconciliation. Accordingly, the Company is providing the disclosures required
by SFAS No. 123.

The pro forma net earnings (loss) and basic earnings per share amounts below
have been derived using the Black-Scholes stock option pricing model with the
following assumptions for each stock option grant during the respective year:

<TABLE>
<CAPTION>
Assumptions                                                                      1999             1998           1997
                                                                             ------------      ---------     ------------

<S>                                                                         <C>                <C>           <C>
      Risk-free interest rates                                               5.1% - 5.86%           5.5%      6.37%-6.63%
      Expected life of stock options (years)                                           5              5                5
      Expected volatility of common stock                                             65%            55%              55%
      Expected annual dividends of stock options                                       0              0                0
      Net earnings (loss) - as reported                                          (46,271)       (30,179)         $17,435
      Net earnings (loss) - pro forma                                            (47,191)       (31,100)         $17,191
      Basic earnings (loss) per share - as reported                         $      (2.12)      $  (1.44)     $      1.08
      Basic earnings (loss) per share - pro forma                           $      (2.17)      $  (1.48)     $      1.06
</TABLE>

The pro forma effects on net earnings and earnings per common share for fiscal
1999, 1998 and 1997 may not be representative of the pro forma effects
Statements of Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" may have in future years.

                                       40

<PAGE>   41


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


20. RETIREMENT PLANS

The Company has a profit-sharing plan (defined contribution) retirement plan
covering employees in the United States, except employees who are members of a
union who bargained separately for retirement benefits. Employees are eligible
upon attaining the age twenty-one (21) and completing six months of service. The
amount of contribution to the plan is determined annually by the Board of
Directors and may vary from zero to fifteen percent of covered compensation.

The Company, through its collective bargaining agreements with various unions,
contributes to the unions' retirement plans. For the years ended November 30,
1999, 1998, and 1997, an expense of $4,100, $2,700, and $2,700, respectively,
was incurred for these retirement plans.

21. LITIGATION

The United States Attorney for the Middle District of Louisiana (the "US
Attorney") advised Advanced Coil Industries ("ACI") a division of Chempower,
Inc., a subsidiary of the Company acquired in March 1997, that ACI and several
others are the subject of a Federal criminal grand jury investigation in
connection with possible improper markings on coated steel which had occurred in
1994 and 1995 prior to the Company's acquisition of Chempower. The U.S. Attorney
and ACI have agreed that in the event criminal charges are filed, no criminal
charges will be filed against ACI until on or after March 5, 2000. The U.S.
Attorney has also advised ACI that a civil suit has been filed under seal in
Baton Rouge, Louisiana in which ACI is one of several names or potential
defendants alleged to have violated the Federal False Claims Act. As the civil
suit was filed under seal and is unavailable for ACI's review, the Company has
not had the opportunity to review the factual basis of the alleged claim nor the
method by which damages might be calculated. The Company recently received a
report from the U.S. Attorney setting forth its determination of the possible
civil damages by all parties, including ACI. The Company is reviewing the report
with respect to the methodology and the extent of involvement of ACI. However,
if a potential action by the U.S. Attorney and/or under the civil action against
ACI is successful, it could be material to the financial position of the
Company.

At November 30, 1999, there were various claims and disputes incidental to the
business. The Company believes that the disposition of all such claims and
disputes, individually or in the aggregate, should not have a material adverse
affect upon the Company's financial position, results of operations or cash
flows, except as disclosed above.

22. FINANCIAL STATEMENTS

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of cash and trade accounts receivable. At
November 30, 1999, and 1998, the Company had notes receivable balances of
$21,235 and $22,584, respectively, with various entities or persons as described
in Note 4. Although some of the notes are collateralized or partially
collateralized, the ultimate collectibility is dependent on the financial
conditions of the various debtors. Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers comprising
the Company's customer based and their diverse industries and geographic areas.

                                       41

<PAGE>   42


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


22. FINANCIAL STATEMENTS - CONTINUED

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short
maturity of these items. The carrying amounts of long-term debt approximate fair
value because the interest rates on these instruments change with market
interest rates. The fair value of the Senior Notes was approximately $58,650 at
November 30, 1999.

23. SEGMENTS OF THE BUSINESS

The Company operates in Canada and the United States in three primary industry
segments: (1) Industrial Outsourcing Services which involves the repair,
maintenance and modification of boilers, pressure vessels and tubing used in
industrial facilities and includes specialty fabrication services involving
high-quality custom steel and alloy products, (2) Environmental Services which
include the clean-up and treatment of hazardous and non-hazardous organic and
inorganic contaminants utilizing a number of technologies, and (3) Construction
Management Services which involves tenant improvement, renovation, addition and
design services to a national network of retailers. It is the Company's policy
to price intersegment contracts on an equivalent basis to that used for pricing
external contracts. The following is a summary of selected data for these
business segments:

<TABLE>
<CAPTION>
                                               Industrial                                 Construction
                                              Outsourcing           Environmental          Management               Total
                                                Services              Services              Services             Consolidated
                                                ---------             ---------             ---------            ------------

<S>                                             <C>                   <C>                   <C>                   <C>
1999
Revenue                                         $ 171,619             $  33,322             $  53,136             $ 258,077
Operating loss                                    (23,831)               (2,689)               (4,990)              (31,510)
Depreciation and amortization                       4,558                   657                   607                 5,822
Capital expenditures during the year                2,515                   700                   123                 3,338
Identifiable assets                               133,194                51,162                52,568               236,924

1998
Revenue                                         $ 233,193             $  14,115             $  29,181             $ 276,489
Operating loss                                    (24,119)                  (78)               (2,416)              (26,613)
Depreciation and amortization                       3,565                   569                   590                 4,724
Capital expenditures during the year               10,066                 1,456                   272                11,794
Identifiable assets                               197,898                26,864                25,621               250,383

1997
Revenue                                         $ 144,904             $  38,757             $  10,496             $ 194,157
Operating earnings                                 11,732                 7,114                   256                19,102
Depreciation and amortization                       3,664                   964                   410                 5,038
Capital expenditures during the year                1,677                 1,408                    49                 3,134
Identifiable assets                               155,072                40,487                16,227               211,786
</TABLE>

                                       42

<PAGE>   43


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


23. SEGMENTS OF THE BUSINESS - CONTINUED

The following table provides information with respect to the geographic
segmentation of the Company's business.

<TABLE>
<CAPTION>
                                                                                             Total
                                                 Canada             United States          Consolidated
                                                ---------           -------------          ------------

<S>                                             <C>                   <C>                   <C>
1999
Revenue                                         $  79,930             $ 178,147             $ 258,077
Operating loss                                    (10,095)              (21,415)              (31,510)
Depreciation and amortization                         880                 4,942                 5,822
Capital expenditures during the year                2,356                   982                 3,338
Identifiable assets                               146,038                90,886               236,924

1998
Revenue                                         $ 123,056             $ 153,433             $ 276,489
Operating loss                                     (6,123)              (20,490)              (26,613)
Depreciation and amortization                         480                 4,244                 4,724
Capital expenditures during the year                9,160                 2,634                11,794
Identifiable assets                               172,504                77,879               250,383

1997
Revenue                                         $  50,835             $ 143,322             $ 194,157
Operating earnings                                  6,503                12,599                19,102
Depreciation and amortization                       1,223                 3,815                 5,038
Capital expenditures during the year                  332                 2,802                 3,134
Identifiable assets                               122,472                89,314               211,786
</TABLE>

24. SIGNIFICANT TRANSACTIONS AND SUBSEQUENT EVENTS

In November 1997, the Company sold its 50% ownership in MART to a third party
for cash and notes aggregating $14,000, payable quarterly over five years with
interest at 10% per annum. During fiscal 1997, two of the Company's subsidiaries
(SRS and United Eco Systems, Inc. ("United Eco")) sold equipment and provided
services to MART. SRS sold to MART equipment for $4,000 and United Eco provided
construction, maintenance and operation services for approximately $6,600. MART
is a state of the art thermal treatment facility which treat soils, sediments
and other materials contaminated with hazardous and non-hazardous chemicals.
Effective December 1, 1999, the Company acquired all of the outstanding shares
of MART.

The 1997 Consolidated Statement of Operations includes revenue and direct costs
of $24,600 and $14,400, respectively, resulting from these transactions.

                                       43

<PAGE>   44


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION

Set forth below are condensed Consolidating Financial Statements of the Company
(Parent), the Guarantor Subsidiaries, Non Guarantor Subsidiaries (USIS), and the
Company on a consolidated basis.

CONSOLIDATING BALANCE SHEET
AT NOVEMBER 30, 1999

<TABLE>
<CAPTION>
                                                                                           Non-
                                 ASSETS                                                 Guarantor
                                 ------                      Company       Guarantor   Subsidiaries
                                                             (Parent)     Subsidiaries     (USIS)       Eliminations   Consolidated
                                                             --------     ------------     ------       ------------   ------------

<S>                                                         <C>            <C>            <C>                  <C>      <C>
CURRENT ASSETS
    Cash .................................................. $     (31)     $   5,231      $     280      $      --      $   5,480

    Accounts receivable ...................................     3,163         57,451          1,571             --         62,185
    Current portion of notes receivable ...................        --          2,777          1,489             --          4,266
    Amounts receivable from subsidiaries ..................    85,389        (85,389)            --             --             --
    Costs and estimated earnings in excess of billings ....        --          8,279            321             --          8,600
    Inventory .............................................        --         16,694             --             --         16,694
    Refundable income taxes ...............................     1,188             --             --             --          1,188
    Prepaid expenses and other current assets .............     1,368          3,395            249             --          5,012
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL CURRENT ASSETS ............................    91,077          8,438          3,910             --        103,425
                                                            ---------      ---------      ---------      ---------      ---------

PROPERTY, PLANT AND EQUIPMENT, NET ........................     1,263         53,814          1,800             --         56,877
                                                            ---------      ---------      ---------      ---------      ---------

OTHER ASSETS
    Goodwill ..............................................        --         32,030            660             --         32,690
    Deferred income taxes .................................    13,846            613          3,420             --         17,879
    Notes receivable ......................................    11,982            410          4,577             --         16,969
    Investments ...........................................    53,442          3,152             --        (52,075)         4,519
    Other assets ..........................................     4,036            520              9             --          4,565
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL OTHER ASSETS ..............................    83,306         36,725          8,666        (52,075)        76,622
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL ASSETS .................................... $ 175,646      $  98,977      $  14,376      $ (52,075)     $ 236,924
                                                            =========      =========      =========      =========      =========

             LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued liabilities .............. $   4,641      $  32,107      $   2,676      $      --      $  39,424
    Line of credit ........................................        --         18,003             --             --         18,003
    Current portion of long-term debt .....................         6            308            475             --            789
    Income tax payable ....................................       (82)           720             --             --            638
    Billings in excess of costs and estimated earnings ....        --          8,195            246             --          8,441
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL CURRENT LIABILITIES .......................     4,565         59,333          3,397             --         67,295
                                                            ---------      ---------      ---------      ---------      ---------

LONG TERM LIABILITIES
    Senior notes ..........................................   117,300             --             --             --        117,300
    Long-term debt ........................................        13          2,625          1,068             --          3,706
    Other liabilities .....................................        --            915           (371)         2,155          2,699
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL LONG-TERM LIABILITIES .....................   117,313          3,540            697          2,155        123,705
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL LIABILITIES ...............................   121,878         62,873          4,094          2,155        191,000
                                                            ---------      ---------      ---------      ---------      ---------

SHAREHOLDERS' EQUITY
    Share capital .........................................    90,450             21             88           (109)        90,450
    Contributed surplus ...................................     2,845         42,237         22,684        (64,921)         2,845
    Cumulative foreign exchange ...........................    (3,432)         2,323             --             --         (1,109)
    Retained earnings (accumulated deficit) ...............   (36,095)        (8,477)       (12,490)        10,800        (46,262)
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL SHAREHOLDERS' EQUITY ......................    53,768         36,104         10,282        (54,230)        45,924
                                                            ---------      ---------      ---------      ---------      ---------
          TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ........ $ 175,646      $  98,977      $  14,376      $ (52,075)     $ 236,924
                                                            =========      =========      =========      =========      =========
</TABLE>

                                       44

<PAGE>   45


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1999

<TABLE>
<CAPTION>
                                                                                             Non-
                                                                                          Guarantor
                                                             Company        Guarantor    Subsidiaries
                                                             (Parent)      Subsidiaries     (USIS)      Eliminations    Consolidated
                                                             --------      ------------     ------      ------------    ------------

<S>                                                          <C>            <C>            <C>            <C>            <C>
REVENUE .................................................    $      --      $ 235,117      $  22,960      $      --      $ 258,077
                                                             ---------      ---------      ---------      ---------      ---------

COST AND EXPENSES
    Direct costs of revenue .............................           --        206,411         18,531             --        224,942
    Selling, general and administrative expenses ........        3,794         20,901          4,816             --         29,511
    Asset impairment, litigation, and other .............       18,121         10,878            313             --         29,312
    Depreciation and amortization .......................          150          5,635             37             --          5,822
                                                             ---------      ---------      ---------      ---------      ---------
    Total operating costs ...............................       22,065        243,825         23,697             --        289,587
                                                             ---------      ---------      ---------      ---------      ---------

OPERATING LOSS ..........................................      (22,065)        (8,708)          (737)            --        (31,510)
                                                             ---------      ---------      ---------      ---------      ---------

OTHER INCOME (EXPENSE)
    Interest expense, net ...............................      (11,746)           213            146             --        (11,387)
    Other, net ..........................................           --             --             --             --             --
                                                             ---------      ---------      ---------      ---------      ---------
    Total other income (expense) ........................      (11,746)           213            146             --        (11,387)
                                                             ---------      ---------      ---------      ---------      ---------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .....      (33,811)        (8,495)          (591)            --        (42,897)

INCOME TAX PROVISION (BENEFIT) ..........................       (1,988)            --          1,098             --           (890)
                                                             ---------      ---------      ---------      ---------      ---------

LOSS FROM CONTINUING OPERATIONS .........................      (31,823)        (8,495)        (1,689)            --        (42,007)

LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME
TAX BENEFIT OF $2,211 ...................................           --         (4,264)            --             --         (4,264)
                                                             ---------      ---------      ---------      ---------      ---------

NET LOSS ................................................    $ (31,823)     $ (12,759)     $  (1,689)     $      --      $ (46,271)
                                                             =========      =========      =========      =========      =========
</TABLE>

                                       45

<PAGE>   46


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED NOVEMBER 30, 1999

<TABLE>
<CAPTION>
                                                                                                Non-
                                                                                             Guarantor
                                                                    Company    Guarantor    Subsidiaries
                                                                    (Parent)  Subsidiaries     (USIS)     Eliminations Consolidated
                                                                    --------    --------      --------      --------     --------

<S>                                                                 <C>         <C>           <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .........................................................  $(31,823)   $(12,759)     $ (1,689)     $     --     $(46,271)
    Adjustments to reconcile net loss to net cash provided by
       operating activities:
          Asset impairment, litigation, and other ................    18,121      10,878           313            --       29,312
          Gain on repurchase of senior notes .....................      (280)         --            --            --         (280)
          Depreciation and amortization ..........................       150       5,709           (37)           --        5,822
          Change in deferred income taxes ........................    (5,977)        582           871            --       (4,524)
          Change in refundable income taxes ......................     1,231          --            --            --        1,231
          Change in accounts receivable ..........................    (2,396)     (3,390)         (384)           --       (6,170)
          Change in costs and estimated earnings in excess
              of billings ........................................        --       1,246          (248)           --          998
          Change in inventory ....................................        --       1,376            --            --        1,376
          Change in other assets and liabilities .................    (1,498)     (1,078)       (2,654)           --       (5,230)
          Change in accounts payable .............................    (6,604)     (3,205)       (8,131)           --      (17,940)
          Change in billings in excess of costs and estimated
              earnings ...........................................        --         519           862            --        1,381
                                                                    --------    --------      --------      --------     --------
Net cash provided by (used in) operating activities ..............   (29,076)       (122)      (11,097)           --      (40,295)
                                                                    --------    --------      --------      --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from (disbursements for) notes receivable ...........      (886)        388        13,882            --       13,384
    Capital expenditures .........................................      (173)     (2,854)         (311)           --       (3,338)
    Acquisition of business, net of cash received ................        --         821         2,348            --        3,169
    Proceeds from sale of assets .................................        --          --         3,282            --        3,282
    Increase in goodwill .........................................        --         (89)           89            --           --
    Increase in minority interest ................................        --         339            --            --          339
    Increase in investments ......................................    (1,227)     (2,273)         (300)           --       (3,800)
                                                                    --------    --------      --------      --------     --------
Net cash provided by (used in) investing activities ..............    (2,286)     (3,668)       18,990            --       13,036
                                                                    --------    --------      --------      --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from line of credit .................................        --      18,003            --            --       18,003
    Proceeds from long-term debt .................................        --          --           164            --          164
    Disbursements/receipts on intercompany debt ..................    19,705     (19,705)           --            --           --
    Principal payments on long-term debt .........................       (96)       (317)       (7,777)           --       (8,190)
    Repurchase of senior notes ...................................      (420)         --            --            --         (420)
                                                                    --------    --------      --------      --------     --------
Net cash provided by (used in) financing activities ..............    19,189      (2,019)       (7,613)           --        9,557
                                                                    --------    --------      --------      --------     --------
EFFECT OF FOREIGN EXCHANGE FLUCTUATIONS ON CASH ..................       859         502            --            --        1,361
                                                                    --------    --------      --------      --------     --------
NET INCREASE (DECREASE)  IN CASH .................................   (11,314)     (5,307)          280            --      (16,341)
CASH AT BEGINNING OF YEAR ........................................    11,283      10,538            --            --       21,821
                                                                    --------    --------      --------      --------     --------
CASH AT END OF YEAR ..............................................  $    (31)   $  5,231      $    280      $     --     $  5,480
                                                                    ========    ========      ========      ========     ========

Supplemental disclosure of noncash investing & financing activities
Acquisition of subsidiaries through issuance of stock ............       500          --            --            --          500
Acquisition of assets through issuance of stock ..................        --          --            --            --           --
Notes receivable issued for sale of assets .......................        --          --        24,396            --       24,396
Acquisition of equipment for long term debt ......................        --          --         1,529            --        1,529
</TABLE>

                                       46

<PAGE>   47


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING BALANCE SHEET
AT NOVEMBER 30, 1998

<TABLE>
<CAPTION>
                                 ASSETS                          Company      Guarantor
                                 ------                          (Parent)    Subsidiaries    Eliminations  Consolidated
                                                                ---------      ---------      ---------      ---------

<S>                                                             <C>            <C>            <C>            <C>
CURRENT ASSETS
    Cash ..................................................     $  11,283      $  10,538      $      --      $  21,821
    Accounts receivable ...................................           767         50,026             --         50,793
    Current portion of notes receivable ...................         1,916          3,164             --          5,080
    Amounts receivable from subsidiaries ..................       105,093       (105,093)            --             --
    Costs and estimated earnings in excess of billings ....            --         11,202             --         11,202
    Inventory .............................................            --         23,080             --         23,080
    Refundable income taxes ...............................         2,419             --             --          2,419
    Prepaid expenses and other current assets .............         1,003          3,424             --          4,427
                                                                ---------      ---------      ---------      ---------
          TOTAL CURRENT ASSETS ............................       122,481         (3,659)            --        118,822
                                                                ---------      ---------      ---------      ---------

PROPERTY, PLANT AND EQUIPMENT, NET ........................           881         53,954             --         54,835
                                                                ---------      ---------      ---------      ---------

OTHER ASSETS
    Goodwill ..............................................            --         30,767             --         30,767
    Deferred income taxes .................................         8,142          1,322             --          9,464
    Notes receivable ......................................        17,244            260             --         17,504
    Investments ...........................................        54,635          1,450        (42,230)        13,855
    Other assets ..........................................         4,493            643             --          5,136
                                                                ---------      ---------      ---------      ---------
          TOTAL OTHER ASSETS ..............................        84,514         34,442        (42,230)        76,726
                                                                ---------      ---------      ---------      ---------
          TOTAL ASSETS ....................................     $ 207,876      $  84,737      $ (42,230)     $ 250,383
                                                                =========      =========      =========      =========

             LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued liabilities ..............     $   5,482      $  27,102      $      --      $  32,584
    Notes payable .........................................            --             --             --             --
    Current portion of long-term debt .....................            --            630             --            630
    Income tax payable ....................................           191          1,143             --          1,334
    Billings in excess of costs and estimated earnings ....            --          3,834             --          3,834
                                                                ---------      ---------      ---------      ---------
          TOTAL CURRENT LIABILITIES .......................         5,673         32,709             --         38,382
                                                                ---------      ---------      ---------      ---------

LONG TERM LIABILITIES
    Senior notes ..........................................       118,000             --             --        118,000
    Long-term debt ........................................            70          2,619             --          2,689
    Other liabilities .....................................            --          1,074             --          1,074
                                                                ---------      ---------      ---------      ---------
          TOTAL LONG-TERM LIABILITIES .....................       118,070          3,693             --        121,763
                                                                ---------      ---------      ---------      ---------

          TOTAL LIABILITIES ...............................       123,743         36,402             --        160,145
                                                                ---------      ---------      ---------      ---------

SHAREHOLDERS' EQUITY
    Share capital .........................................        89,854             19            (19)        89,854
    Contributed surplus ...................................         2,845         42,211        (42,211)         2,845
    Cumulative foreign exchange ...........................        (4,291)         1,821             --         (2,470)
    Retained earnings (accumulated deficit) ...............        (4,275)         4,284             --              9
                                                                ---------      ---------      ---------      ---------
          TOTAL SHAREHOLDERS' EQUITY ......................        84,133         48,335        (42,230)        90,238
                                                                ---------      ---------      ---------      ---------

          TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ........     $ 207,876      $  84,737      $ (42,230)     $ 250,383
                                                                =========      =========      =========      =========
</TABLE>

                                       47

<PAGE>   48


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998

<TABLE>
<CAPTION>
                                                              Company       Guarantor
                                                              (Parent)     Subsidiaries   Eliminations   Consolidated
                                                              ---------      ---------      ---------      ---------

<S>                                                           <C>            <C>            <C>            <C>
REVENUE .................................................     $      --      $276,489       $      --      $ 276,489
                                                              ---------      ---------      ---------      ---------

COST AND EXPENSES
    Direct costs of revenue .............................            --        236,152             --        236,152
    Selling, general and administrative expenses ........         4,107         30,640             --         34,747
    Asset impairment, litigation, and other .............        19,199          8,280             --         27,479
    Depreciation and amortization .......................           119          4,605             --          4,724
                                                              ---------      ---------      ---------      ---------
    Total operating costs ...............................        23,425        279,677             --        303,102
                                                              ---------      ---------      ---------      ---------

OPERATING  LOSS .........................................       (23,425)        (3,188)            --        (26,613)
                                                              ---------      ---------      ---------      ---------

OTHER INCOME (EXPENSE)
    Interest expense, net ...............................           127         (9,293)            --         (9,166)
    Other, net ..........................................        (1,498)            --             --         (1,498)
                                                              ---------      ---------      ---------      ---------
    Total other income (expense) ........................        (1,371)        (9,293)            --        (10,664)
                                                              ---------      ---------      ---------      ---------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .....       (24,796)       (12,481)            --        (37,277)

INCOME TAX BENEFIT ......................................        (8,795)            --             --         (8,795)
                                                              ---------      ---------      ---------      ---------

LOSS FROM CONTINUING OPERATIONS .........................       (16,001)       (12,481)            --        (28,482)

LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME
TAX BENEFIT OF $911 .....................................            --         (1,697)            --         (1,697)
                                                              ---------      ---------      ---------      ---------

NET LOSS ................................................     $ (16,001)     $ (14,178)     $      --      $ (30,179)
                                                              =========      =========      =========      =========
</TABLE>

                                       48

<PAGE>   49


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED NOVEMBER 30, 1998

<TABLE>
<CAPTION>
                                                                        Company        Guarantor
                                                                        (Parent)      Subsidiaries  Eliminations   Consolidated
                                                                        --------      ------------  ------------   ------------

<S>                                                                     <C>            <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..........................................................     $ (15,090)     $ (15,089)     $      --     $ (30,179)
     Adjustments to reconcile net loss to net cash provided by
        operating activities:
         Asset impairment, litigation, and other ..................        28,629         (1,489)            --        27,140
         Loss on early extinguishment of debt .....................         2,400             --             --         2,400
         Gain on repurchase of senior notes .......................          (570)            --             --          (570)
         Depreciation and amortization ............................           119          4,797             --         4,916
         Change in deferred income taxes ..........................        (6,334)          (953)            --        (7,287)
         Change in refundable income taxes ........................        (2,419)            --             --        (2,419)
         Change in accounts receivable ............................           603         (1,047)            --          (444)
         Change in costs and estimated earnings in excess of
           billings ...............................................            --          1,943             --         1,943
         Change in inventory ......................................            --         (5,001)            --        (5,001)
         Change in other assets and liabilities ...................        (1,881)          (642)            --        (2,523)
         Change in notes receivable ...............................         3,549             --             --         3,549
         Change in accounts payable ...............................         4,466           (281)            --         4,185
         Change in billings in excess of costs and estimated
           earnings ...............................................            --            484             --           484
                                                                        ---------      ---------      ---------     ---------
Net cash provided by (used in) operating activities ...............        13,472        (17,278)            --        (3,806)
                                                                        ---------      ---------      ---------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds (disbursements for) notes receivable ................         6,230         (1,275)            --         4,955
     Capital expenditures .........................................          (162)       (11,632)            --       (11,794)
     Increase in investments ......................................       (18,898)         2,448             --       (16,450)
                                                                        ---------      ---------      ---------     ---------
Net cash used in investing activities .............................       (12,830)       (10,459)            --       (23,289)
                                                                        ---------      ---------      ---------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from senior notes ...................................       116,139             --             --       116,139
     Proceeds from notes payable ..................................         5,700             --             --         5,700
     Proceeds from long-term debt .................................            30            468             --           498
     Disbursements/receipts on intercompany debt ..................       (35,720)        21,116             --       (14,604)
     Principal payments on notes payable ..........................       (14,200)       (44,868)            --       (59,068)
     Principal payments on long-term debt .........................       (58,515)        58,515             --            --
     Repurchase of senior notes ...................................        (1,430)            --             --        (1,430)
     Debt issuance costs ..........................................            --             --             --            --
     Stock issuance costs .........................................           (89)            --             --           (89)
     Issuance of common stock .....................................         1,470             --             --         1,470
                                                                        ---------      ---------      ---------     ---------
Net cash provided by financing activities .........................        13,385         35,231             --        48,616
                                                                        ---------      ---------      ---------     ---------

EFFECT OF FOREIGN EXCHANGE FLUCTUATIONS ON CASH ...................        (2,890)         1,931             --          (959)
                                                                        ---------      ---------      ---------     ---------
NET INCREASE IN CASH ..............................................        11,137          9,425             --        20,562
CASH AT BEGINNING OF YEAR .........................................           146          1,113             --         1,259
                                                                        ---------      ---------      ---------     ---------
CASH AT END OF YEAR ...............................................     $  11,283      $  10,538      $      --     $  21,821
                                                                        =========      =========      =========     =========

Supplemental disclosure of noncash investing and financing
activities
Acquisition of subsidiaries through issuance of stock .............         1,526             --             --         1,526
Acquisition of assets through issuance of stock ...................         8,910             --             --         8,910
</TABLE>

                                       49

<PAGE>   50


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997

<TABLE>
<CAPTION>
                                                      Company       Guarantor
                                                      (Parent)     Subsidiaries   Eliminations   Consolidated
                                                      --------     ------------   ------------   ------------

<S>                                                   <C>            <C>            <C>           <C>
REVENUE ...........................................   $  20,952      $ 173,205      $      --     $ 194,157
                                                      ---------      ---------      ---------     ---------

COST AND EXPENSES
    Direct costs of revenue .......................       9,858        134,525             --       144,383
    Selling, general and administrative expenses...       1,989         23,645             --        25,634
    Asset impairment, litigation, and other .......          --             --             --            --
    Depreciation and amortization .................         484          4,554             --         5,038
                                                      ---------      ---------      ---------     ---------
    Total operating costs .........................      12,331        162,724             --       175,055
                                                      ---------      ---------      ---------     ---------
OPERATING EARNINGS ................................       8,621         10,481             --        19,102
                                                      ---------      ---------      ---------     ---------

OTHER INCOME (EXPENSE)
    Interest expense, net .........................      (2,053)        (2,717)            --        (4,770)
    Other, net ....................................       3,004            235             --         3,239
                                                      ---------      ---------      ---------     ---------
    Total other income (expense) ..................         951         (2,482)            --        (1,531)
                                                      ---------      ---------      ---------     ---------

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES .............................................       9,572          7,999             --        17,571

INCOME TAX PROVISION ..............................       1,254             --             --         1,254
                                                      ---------      ---------      ---------     ---------
EARNINGS FROM CONTINUING OPERATIONS ...............       8,318          7,999             --        16,317

EARNINGS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAX PROVISION OF $576 ......................          --          1,118             --         1,118
                                                      ---------      ---------      ---------     ---------
NET EARNINGS ......................................   $   8,318      $   9,117      $      --     $  17,435
                                                      =========      =========      =========     =========
</TABLE>

                                       50

<PAGE>   51


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED NOVEMBER 30, 1997

<TABLE>
<CAPTION>
                                                                         Company         Guarantor
                                                                         (Parent)       Subsidiaries    Eliminations    Consolidated
                                                                         --------       ------------    ------------    ------------

<S>                                                                     <C>              <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings .........................................................  $     7,472      $     9,963    $        --     $    17,435
    Adjustments to reconcile net earnings to net cash provided by
          operating activities:
          Gain on sale of assets and subsidiaries ....................       (2,459)            (223)            --          (2,682)
          Depreciation and amortization ..............................          484            4,898             --           5,382
          Change in deferred income taxes ............................        2,092             (263)            --           1,829
          Noncash income, net ........................................          648             (323)            --             325
          Change in accounts receivable ..............................       (1,032)         (14,900)            --         (15,932)
          Change in notes receivable .................................      (14,000)              --             --         (14,000)
          Change in costs and estimated earnings in excess
              of billings.............................................           --           (7,824)            --          (7,824)
          Change in inventory ........................................           --              106             --             106
          Change in other assets and liabilities .....................        2,979           (1,555)            --           1,424
          Change in accounts payable .................................         (372)          (4,151)            --          (4,523)
          Change in billings in excess of costs and estimated
              earnings ...............................................           --             (458)            --            (458)
                                                                        -----------      -----------    -----------     -----------
    Net cash used in operating activities ............................       (4,188)         (14,730)            --         (18,918)
                                                                        -----------      -----------    -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from (disbursements for) notes receivable ...............       (4,661)           3,563             --          (1,098)
    Capital expenditures .............................................         (461)          (2,673)            --          (3,134)
    Proceeds from sales of assets ....................................           --            3,448             --           3,448
    Acquisition of business, net of cash acquired ....................      (10,481)             (12)            --         (10,493)
    Increase in investments ..........................................       (1,277)              --             --          (1,277)
                                                                        -----------      -----------    -----------     -----------
Net cash provided by (used in) investing activities ..................      (16,880)           4,326             --         (12,554)
                                                                        -----------      -----------    -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable ......................................       33,500               --             --          33,500
    Proceeds from long-term debt .....................................       58,500               --             --          58,500
    Principal payments on notes payable ..............................      (15,834)         (37,362)            --         (53,196)
    Principal payments on long-term debt .............................           --           (7,607)            --          (7,607)
    Proceeds from sales/leaseback ....................................           --            4,000             --           4,000
    Disbursements/receipts on intercompany debt ......................      (50,762)          50,762             --              --
    Debt issuance costs ..............................................       (1,917)              --             --          (1,917)
    Stock issuance costs .............................................       (2,479)              --             --          (2,479)
    Issuance of common stock .........................................        1,613               --             --           1,613
                                                                        -----------      -----------    -----------     -----------
Net cash provided by financing activities ............................       22,621            9,793             --          32,414
                                                                        -----------      -----------    -----------     -----------
EFFECT OF FOREIGN EXCHANGE FLUCTUATIONS ON CASH ......................       (1,401)           1,401             --              --
                                                                        -----------      -----------    -----------     -----------
NET INCREASE IN CASH .................................................          152              790             --             942
CASH AT BEGINNING OF YEAR ............................................           (6)             323             --             317
                                                                        -----------      -----------    -----------     -----------
CASH AT END OF YEAR ..................................................  $       146      $     1,113    $        --     $     1,259
                                                                        ===========      ===========    ===========     ===========
Supplemental disclosure of cash flow information
    Cash payments for interest                                                1,788            2,930             --           4,718
    Cash payments for income taxes                                               --              281             --             281
</TABLE>

                                       51

<PAGE>   52


                            AMERICAN ECO CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (United States Dollars in thousands, except per share amounts)


25. GUARANTOR FINANCIAL STATEMENT INFORMATION (CONTINUED)

CONSOLIDATING STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED NOVEMBER 30, 1997

 Supplemental disclosure of noncash investing and financing activities

<TABLE>
<CAPTION>
                                                                  Company    Guarantor
                                                                  (Parent)  Subsidiaries  Elimination  Consolidated
                                                                  --------  ------------  -----------  ------------

<S>                                                                 <C>          <C>              <C>     <C>
      Notes receivable issued for sale of subsidiaries              11,000           --           --      11,000
      Notes receivable increase to USIS through stock issuance       7,784           --           --       7,784
      Acquisition of subsidiaries through issuance of stock          5,296           --           --       5,296
      Debentures converted to stock                                 21,500           --           --      21,500
      Transfer of assets to/from parent and subsidiaries               (26)          26           --          --
      Acquisition of equipment for notes payable                        --           58           --          58
      Transfer of investment from subsidiary to parent               1,000       (1,000)          --          --
</TABLE>

                                       52

<PAGE>   53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         Not Applicable

                                       53
<PAGE>   54


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The names of the executive officers and directors are set forth below,
together with the positions held by each such person in the Company and their
ages as of January 31, 2000. All directors are elected annually by the
shareholders of the Company and serve until their successors are duly elected
and qualified. Officers are elected by the Board of Directors and serve at the
will of the Board of Directors.

<TABLE>
<CAPTION>
              NAME                                    AGE                                   POSITIONS
              ----                                    ---                                   ---------

<S>                                                   <C>                      <C>
J.C. Pennie(1)                                        60                       Chairman of the Board of Directors

Michael E. McGinnis(1)                                50                       President, Chief Executive Officer
                                                                               and Director

Michael Appling Jr.                                   33                       Chief Financial Officer and Vice
                                                                               President

Matthew D. Hill                                       30                       Chief  Operating Officer and Senior
                                                                               Vice President

Todd Quattlebaum                                      40                       Vice President of Operations

Bruce A. Rich                                         60                       Secretary

Barry Cracower(2)                                     61                       Director

William A. Dimma(2)(3)(4)                             71                       Director

Honorable Donald R. Getty(3)(4)                       66                       Director
</TABLE>

(1)  Member of Executive Committee

(2)  Member of Audit Committee

(3)  Member of Compensation Committee

(4)  Member of Corporate Governance Committee

EXECUTIVE OFFICERS

         J.C. PENNIE has been a director of the Company since February 1992, the
Chairman of the Board of Directors since December 1998 and was the Vice-Chairman
from October 1993 to December 1998. Mr. Pennie served as the Company's President
and Chief Executive Officer in 1992 in order to execute the downsizing and
reorganization of the Company. Since 1974, he has been President of Windrush
Corporation which provides management and financial services to turnaround and
start-up companies. He is also the Chairman of Imark Corporation, a Canadian
public company.

         MICHAEL E. MCGINNIS has been the Chief Executive Officer of the Company
since 1993, the President since December 1998 having served as President from
1993 to July 1998, a director since 1994 and was Chairman from May 1997 to
December 1998. He was the President and Chief Executive Officer of Eco
Environmental, a provider of environmental remediation services to industrial
clients, when it was acquired by the Company in 1993. Prior to joining Eco
Environmental, in 1992, Mr. McGinnis was employed with The Brand Companies,
Inc., one of the largest asbestos abatement contractors in the United States.
Mr. McGinnis joined The Brand Companies in 1965 and served in various
operational and administrative capacities for over 27 years. Mr. McGinnis has
been a director of USIS since February 1996, having served as its Chairman of
the Board from June 1996 to October 1997, and its President from March 1996 to
August 1996, and resumed serving as President in November 1999.

         MICHAEL APPLING JR. has served as Chief Financial Officer and Vice
President since June 1999. Prior to joining the Company, from September 1997 to
May 1999, Mr. Appling served as Vice President, Finance and Accounting and
Director of Corporate Development for ITEQ, Inc., an industrial service and
manufacturing company. From 1991 to 1997, Mr. Appling worked for the audit
practice of Arthur Andersen LLP most recently as manager where he served several
public companies extensively involved in mergers and acquisitions. Since
November 1999, Mr. Appling has also served as Chief Financial Officer and
Director of USIS.

                                       54

<PAGE>   55


         MATTHEW D. HILL has served as Chief Operating Officer since May 1,
1999. He has served as Senior Vice President since December 1998, having served
as Vice President/Director of Operations, Gulf Coast, and President of The
Turner Group from April 1997 to December 1998. He served as the Company's
Executive Director of Administration from January 1997 until March 1997 and as
the Company's Director of Special Projects from March 1996 until January 1997.
Prior thereto, Mr. Hill was the Manager of Eco Environmental's Spill Response
Division from April 1995 to March 1996. Prior to joining Eco Environmental, Mr.
Hill had been Plant Manager of Alumatech, Inc., a specialty aluminum trailer
manufacturer, since May 1992.

         TODD QUATTLEBAUM has been Vice President of Operations since January 1,
2000. Between 1997 and 1999, Mr. Quattlebaum served as Vice President of
Operations for ITEQ, Inc., an industrial service and manufacturing company.
Prior to 1997, he served Joy Technologies in the capacities of Project Director
including Precontracts, Contract Administration, and Product Development. Prior
to Joy Technologies, Mr. Quattlebaum held manager positions with Asea Brown
Bover (ABB), and Dresser Industries, Inc.

         BRUCE A. RICH has been Secretary of the Company since May 1997. He has
been a partner in Thelen Reid & Priest LLP, a New York, New York law firm since
1992, and prior thereto was a partner in another law firm. His law firm performs
legal services for the Company.

OUTSIDE DIRECTORS

         BARRY CRACOWER has been a director of the Company since December 1996.
Mr. Cracower has been the President of Pharmx Rexall Drug Stores Ltd., a drug
store chain based in Concord, Ontario, since 1990. Prior to 1990, he held senior
executive positions at several major Canadian corporations. Mr. Cracower served
on the Board of Directors of the predecessor corporation to the Company, ECO
Corporation, in 1992 during its restructuring. He also is a director of
Algonquin Mercantile Corporation, Imark Corporation, and Katz Enterprises, all
Canadian companies.

         WILLIAM A. DIMMA has been a director of the Company since January 1997.
He has sat on 48 corporate Boards and 28 not-for-profit Boards since 1967. From
1975 to 1993, he was, successively, President of Torstar Corporation and Toronto
Star Newspapers Limited, A.E. LePage Limited, and Royal LePage Limited. Mr.
Dimma currently chairs the Boards of Home Capital Group Inc., Perigee Inc.,
Royal LePage Commercial Advisory Board, SwissRe Holdings (Canada) Inc., Swiss Re
Life & Health Canada and Swiss Reinsurance Company Canada. In addition, he is a
director of Minacs Worldwide Group Inc., Magellan Aerospace Corporation, and
Trilon Financial Corporation.

         HONORABLE DONALD R. GETTY has been a director of the Company since
January 1997. Mr. Getty has been the President and Chief Executive Officer of
Sunnybank Investments Ltd., an investment and consulting company located in
Edmonton, Alberta, since December 1992. Mr. Getty has held elected and
appointive offices in Canadian government, most recently as the Premier of the
Province of Alberta from 1985 to 1992 and as the Minister of Energy and Natural
Resources for the Provincial Government of Alberta between 1971 and 1979. Mr.
Getty currently serves on the boards of directors of Guyanor Resources S.A., a
mining company in French Guyana; and Nationwide Resources, Mera Petroleum, an
oil and gas company, Cen Pro Technologies, an engineering company and Eclipse
Investments, all located in Canada. Mr. Getty is also a director and Vice
Chairman of the Alberta Racing Corporation, which is responsible for all forms
of horse racing in Alberta, Canada.

SIGNIFICANT EMPLOYEES

         JOSEPH D. DEFRANCO has served as the Subsidiary President of SRS since
July 1996 when SRS was acquired by the Company. Mr. DeFranco had served as the
President, Chief Executive Officer, Treasurer and a director of SRS since 1973.
Mr. DeFranco will become a consultant of the Company effective April 1, 2000.

         MICHAEL FUGITT has served as the Subsidiary President of C. A. Turner
Construction since April 1998, having held various positions at The Turner Group
since 1989.

         BESIM HALEF has been Subsidiary President of MM Industra since June
1996. Between April 1994 and May 1996, Mr. Halef served as a project general
manager for National Heavy Industries Limited, Saudi Arabia in connection with a
project to build specialty fabrication facilities in the Kingdom of Saudi
Arabia. Mr. Halef had served in various capacities at M&M Manufacturing Limited
Partnership, the predecessor of MM Industra, between 1985 and 1994, most
recently as the Executive Vice President and General Manager of that company
from March 1991 to April 1994.

         WILLI HAMM has served as the Subsidiary President of Industra Service
since June 1997, having been a senior executive at Industra Service since 1986.

                                       55
<PAGE>   56


         CECIL HODGKINSON has served as the Subsidiary President of Action
Contract Services since March 1997, having been with The Turner Group from 1989
to March 1997 with his last position being Manager of Estimating.

         BRIAN HORNE has served as the Subsidiary President of MART since
September 1997. From July 1995 to August 1997, Mr. Horne served as Northeast
Manager of U.S. Operations for the Company's wholly-owned subsidiary SRS. He has
17 years experience in the waste processing industry.

         JOHN HOYLE has served as the Subsidiary President of United Eco since
November 1996. Mr. Hoyle had been the President of Four Seasons Environmental,
Inc., an environmental services company, between July 1996 and August 1993, and
served as the Vice President of that corporation between August 1993 and
September 1990.

         C.N. JONES has served as the Subsidiary President of CCG since
September 1997 when CCG was acquired by the Company. Mr. Jones had served as the
President of CCG since 1991.

         DAVID KRACHE has served as the Subsidiary President of Chempower since
September 1998. From May 1998 to September 1998, Mr. Krache had been at Dominion
Bridge, and from April 1994 to May 1998, he had been President of National
Service Cleaning Corp., a subsidiary of NSC Corp.

         The Board of Directors has an Audit Committee, a Compensation Committee
and a Corporate Governance Committee. The Audit Committee reviews the annual and
quarterly financial statements, and meets with the outside accountants and
senior management regarding, among other items, internal control procedures
established by the Company. The Compensation Committee sets the level of
compensation of the Company's executive officers. The Corporate Governance
Committee monitors compliance with the corporate governance guidelines of the
Company.

         During the 1999 fiscal year, the Board of Directors met in person or
telephonically eight times, and each director attended at least 88% of the
meetings. The Board of Directors also authorized corporate actions through
written consents.

COMPLIANCE WITH CERTAIN REPORTING REQUIREMENTS

         Section 16(a) of the Securities Exchange Act of 1934 requires that the
officers, directors and 10.0% shareholders of a domestic issuer report the
ownership and purchase or sale of the equity securities of such issuer to the
SEC. Based on the Company's records, the Company believes its officers,
directors and 10.0% shareholders are in compliance with Section 16(a) for fiscal
1999.

                                       56
<PAGE>   57


ITEM 11.  EXECUTIVE COMPENSATION

         The following table discloses the compensation awarded to or earned by
the Chief Executive Officer and the other most highly compensated executive
officers of the Company as of the end of fiscal 1999 whose annual salary plus
other forms of compensation exceeded $100,000 (the "Named Executive Officers").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                        LONG-TERM         ALL OTHER
                                                 ANNUAL COMPENSATION                   COMPENSATION     COMPENSATION
                                     -------------------------------------------------------------------------------
          NAME                                                                          SECURITIES
          AND                                                     OTHER ANNUAL          UNDERLYING
        POSITION           YEAR      SALARY ($)    BONUS ($)    COMPENSATION ($)       OPTIONS (#)
        --------           ----      ----------    ---------    ----------------       ----------

<S>                        <C>              <C>          <C>         <C>                 <C>                    <C>
J. C. Pennie               1999             0            0           335,000(4)          140,000                0
Chairman                   1998             0            0           303,000(4)           40,000                0
of the Board               1997             0            0           112,885(4)          100,000                0


Michael E. McGinnis        1999       296,923 (1)        0             8,310(2)          210,000                0
President and              1998       300,000 (1)        0            11,676(2)           40,000                0
Chief Executive            1997       279,166 (1)        0            10,885(2)          150,000                0
Officer


Michael Appling Jr.        1999        75,000            0             4,500(2)           50,000                0
Chief Financial Officer
and Vice President(3)

Matthew D. Hill            1999       199,103 (1)        0            11,297(2)          161,000                0
Chief Operating Officer
and Senior Vice
President (3)
</TABLE>

---------------------

(1)  Includes $2,000, $1,056, and $1,600 of deferred compensation contributed by
     the Company to Mr. McGinnis' 401K Plan in fiscal 1999, 1998 and 1997,
     respectively, and includes $2,500 of deferred compensation contributed by
     the Company to Mr. Hill's 401K Plan in fiscal 1999.

(2)  Represents automobile lease payments or allowance paid by the Company.

(3)  Became an Executive Officer during Fiscal Year 1999.

(4)  Represents fees paid to Windrush Corporation of which by Mr. Pennie is
     President, for executive services for the Company's Toronto office.

EMPLOYMENT CONTRACTS

         As of May 1, 1999, the Company and Michael E. McGinnis entered into a
new employment agreement for Mr. McGinnis to serve as President and Chief
Executive Officer pursuant to which he receives an annual base salary of
$300,000, an automobile allowance of $750 per month plus any operating and
maintenance expenses associated with such vehicle, and is entitled to
participate in an annual bonus program determined by the level of basic earnings
per share of the Company for each fiscal year of the term of the employment
agreement. The agreement provides for $5 million life insurance coverage, up to
five years compensation upon termination by the Company without cause, and upon
change of control subject to certain limitations. The agreement is subject to
two year non-compete or certain conditions. The employment agreement terminates
on May 1, 2004. Mr. McGinnis agreed to a salary reduction of $50,000 as of
January 1, 2000.

                                       57

<PAGE>   58


         The Company and Matthew D. Hill have entered into an employment
agreement pursuant to which Mr. Hill receives an annual base salary of $200,000,
an automobile allowance of $750 per month plus any operating and maintenance
expenses associated with such vehicle, and is entitled to participate in an
annual bonus program determined by the level of basic earnings per share of the
Company for each fiscal year of the term of the employment agreement. The
agreement provides for $2 million life insurance coverage, up to two years
compensation upon termination by the Company without cause, and upon change of
control subject to certain limitations. The agreement is subject to two year
non-compete or certain conditions. The employment agreement terminates on June
1, 2002. Mr. Hill agreed to a salary reduction of $16,000 as of January 1, 2000.

         The Company and Michael Appling Jr. have entered into an employment
agreement pursuant to which Mr. Appling receives an annual base salary of
$150,000, an automobile allowance of $750 per month plus any operating and
maintenance expenses associated with such vehicle, and is entitled to
participate in an annual bonus program determined by the level of basic earnings
per share of the Company for each fiscal year of the term of the employment
agreement. The agreement provides for $2 million life insurance coverage, up to
one year compensation upon termination by the Company without cause, and up to
two years upon change of control subject to certain limitations. The agreement
is subject to one year non-compete or certain conditions. The employment
agreement terminates on June 1, 2001. Mr. Appling agreed to a salary reduction
of $10,000 as of January 1, 2000.

         Many of the Company's senior officers agreed to voluntary salary
reductions as of January 1, 2000.

COMPENSATION OF DIRECTORS

         The directors of the Company who are not otherwise employees or
consultants of the Company receive CDN$20,000 per year. In addition, the
directors of the Company receive CDN$1,000 per Board or committee meeting
attended and all reasonable expenses incurred by the directors in respect of
their duties are reimbursed by the Company. None of the directors of the Company
receives compensation in his capacity as a director pursuant to any other
arrangement or in lieu of any standard arrangement except through the granting
of stock options.

STOCK OPTIONS

         The following table provides information with respect to stock options
granted to the Named Executive Officers during fiscal 1999.

                              STOCK OPTIONS GRANTED
                     IN FISCAL YEAR ENDED NOVEMBER 30, 1999

<TABLE>
<CAPTION>
                                                                                  MARKET VALUE
                                                       % OF TOTAL                 OF SECURITIES
                                                         OPTIONS                   UNDERLYING
                                     SECURITIES         GRANTED TO                 OPTIONS ON
                                        UNDER            EMPLOYEES       EXERCISE  THE DATE OF
                                       OPTIONS         IN FINANCIAL        PRICE      GRANT          EXPIRATION
NAME                                  GRANTED (#)          YEAR           (CDN$)     (CDN$)             DATE
----                                  -----------          ----           ------     ------             ----

<S>                                     <C>                  <C>            <C>       <C>              <C>
J.C. Pennie                             140,000              15%            2.20      308,000          4/23/04

Michael E. McGinnis                     210,000              23%            2.20      462,000          4/23/04

Michael Appling Jr.                      50,000               5%            2.80      140,000           6/1/04

Matthew D. Hill                         100,000              17%            2.21      221,000          3/23/04
                                         31,000                             2.20       68,200          4/23/04
                                         30,000                             1.76       52,800           9/7/04
</TABLE>

                                       58

<PAGE>   59


         The following table provides information with respect to stock options
exercised by the Named Executive Officers during the fiscal year ended November
30, 1999 and the balance of stock options remaining after such exercises. All
stock options described below were presently exercisable at November 30, 1999.

                       AGGREGATED STOCK OPTIONS EXERCISED
                     IN FISCAL YEAR ENDED NOVEMBER 30, 1999
                           AND FISCAL YEAR-END VALUES

<TABLE>
<CAPTION>
                                                                     NUMBER OF SECURITIES   VALUE OF UNEXERCISED
                                                                          UNDERLYING         IN-THE-MONEY STOCK
                                                                      UNEXERCISED OPTIONS     OPTIONS AT FISCAL
                                                                           AT FISCAL               YEAR-END
                                                                            YEAR-END              (CDN$)(1)
                                                                              (#)
                               SECURITIES
                                ACQUIRED
                                  UPON              VALUE REALIZED        EXERCISABLE/           EXERCISABLE/
     NAME                      EXERCISE(#)              (US$)            UNEXERCISABLE          UNEXERCISABLE
     ----                      -----------              -----            -------------          -------------

<S>                                <C>                   <C>             <C>                          <C>
J.C. Pennie                        --                    --              104,000/176,000              0/0
Michael E. McGinnis                --                    --              164,000/256,000              0/0
Michael Appling Jr.                --                    --               10,000/40,000               0/0
Matthew D. Hill                    --                    --               47,000/145,000              0/0
</TABLE>

(1)  Based on the closing price of the Common Shares on The Toronto Stock
     Exchange on November 30, 1999 of CDN$1.21.

                                       59

<PAGE>   60


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth as of January 31, 2000 the number of
Common Shares beneficially owned by (i) each person known to be the beneficial
owner of more than five percent of the outstanding Common Shares, (ii) each
director of the Company, (iii) each Named Executive Officer and (iv) all
executive officers and directors of the Company as a group as known by the
Company or as reflected on the records of the transfer agent.


<TABLE>
<CAPTION>
                        NAME AND ADDRESS OF                                      AMOUNT AND NATURE OF
                          BENEFICIAL OWNER*                                    BENEFICIAL OWNERSHIP(1)
                          -----------------                                  ------------------------------
                                                                             NUMBER              PERCENTAGE
                                                                             ------              ----------

<S>                                                                         <C>                      <C>
Michael E. McGinnis...............................................          238,840(2)               1.0%
J.C. Pennie.......................................................          146,400(3)               0.6%
Honorable Donald R. Getty.........................................          139,000(4)               0.6%
Barry Cracower ...................................................          118,000(4)               0.5%
William A. Dimma .................................................          104,000(4)               0.4%
Michael Appling Jr................................................           10,000(5)                --
Matthew D. Hill...................................................           51,700(6)                --
Directors and executive
officers as a group (7 persons)...................................          807,940(7)               3.7%
</TABLE>

 *   Unless otherwise indicated, the address is c/o American Eco Corporation,
     154 University Avenue, Toronto, Ontario M5H 3Y9.

(1)  Unless otherwise indicated, the Company has been advised that each person
     above has sole voting and investment power over the Common Shares indicated
     above. The number of shares beneficially owned includes Common Shares which
     each beneficial owner has the right to acquire within 60 days of January
     31, 2000.

(2)  Includes 164,000 Common Shares underlying stock options.

(3)  Includes (i) 104,000 Common Shares underlying stock options, (ii) 700
     Common Shares owned by his wife and (iii) 41,700 Common Shares owned by a
     corporation of which he is President.

(4)  Includes 104,000 Common Shares underlying stock options.

(5)  Includes 10,000 Common Shares underlying stock options.

(6)  Includes 47,000 Common Shares underlying stock options.

(7)  Includes Common Shares disclosed in notes (2), (3), (4), (5), and (6)
     above.

                                       60
<PAGE>   61


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MANAGEMENT OR AFFILIATES OF MANAGEMENT

         Pursuant to an agreement among the Company, Windrush Corporation
("Windrush"), and J.C. Pennie, dated May 1, 1999, Windrush received a fee of
$20,000 per month in consideration for executive services for administration,
strategic and marketing planning provided to the Company and is eligible for
annual profit participation based upon levels of the Company's earnings per
share. This agreement expires on May 1, 2004, and has a five-year renewable term
and is subject to a five year payment upon a change in control. Mr. Pennie on
behalf of Windrush has agreed to a fee reduction to $18,000 per month. J.C.
Pennie, the Chairman of the Board of Directors of the Company, is President of
Windrush. Windrush also received a one-time payment of $145,000 for consulting
services related to unsuccessful acquisitions. The previous agreement paid
Windrush a monthly fee of $10,000 from November 1998 to May 1999.

As of August 31, 1997, the Company sold its subsidiaries Eco Environmental and
Environmental Evolutions to Eurostar Interests Ltd. ("Eurostar") for an
aggregate purchase price of $11.0 million payable in a one-year promissory note
(the "Eco Note"), which was to be collateralized by all of the capital stock of
Eurostar. Eurostar assigned its interest in Eco Environmental and Environmental
Evolutions to UKstar (Canada) Inc. ("UKstar"), which in turn transferred its
interest in Eco Environmental and Environmental Evolutions to Eco Technologies
International, Inc. ("ETI"), a Canadian public company. UKstar owns 85.5% of
ETI. Windrush owns 1.6% of ETI. Mr. Pennie also served as the Secretary of
UKstar and as the Chairman of ETI, and Barry Cracower, a director of the
Company, also served as a director of ETI until they resigned on March 30, 1999.
In February 1998, UKstar paid $603,000 to the Company for reimbursement of
monies advanced by the Company for the operating expenses of Eco Environmental
and Environmental Evolutions from September 30, 1997 to November 30, 1997. In
October 1998, UKstar paid $3.0 million on the Eco Note, and is to repay the
remaining $9,313,975 on September 30, 2000 with quarterly interest installments
of $227,028, which obligations are collateralized by 2,000,000 shares of ETI
Common Stock and a $3.0 million performance bond. The Company has made a claim
on the $3.0 million bond and has placed Ukstar under demand for payment. The
Company has written off the entire note balance, but will continue to pursue all
rights and remedies to collect all amounts owed.

         In July 1998, Industra Service entered into a 15-year lease for an
office, shop and warehouse in Edmonton, Alberta from Sunnybank Property Ltd., a
company in which Honorable Donald R. Getty, a director of the Company, is
President and has a 25% interest. The annual lease payments are $320,000.
Management believes the lease terms are at commercially reasonable rates.

         In June 1999, the Company entered into an agreement with Honorable
Donald R. Getty, a director of the Company, to provide consultant services to
help the Company identify upcoming projects and introduce it to prospective
clients. The agreement expires in 12 months and the fee is $5,000 per month.

INDEBTEDNESS OF MANAGEMENT OR AFFILIATES OF MANAGEMENT

         In August 1998, the Board of Directors authorized the Company to loan
up to $100,000 to each Director for the purpose of using the proceeds to
purchase the Company's Common Shares in the open market. These loans are to be
repaid in three years, bear interest at the rate of 9-5/8% per annum, and are
unsecured. Messrs. Fradella, a former Director, Getty and Pennie each took a
loan for $100,000 and Mr. Cracower took a loan for $50,000. As of November 30,
1999, the following Director loans were outstanding: Mr. Fradella - $112,499.32,
Mr. Getty - $112,472.95, Mr. Pennie - $84,448.84 and Mr. Cracower - $20,212.52.

         During fiscal 1997, the Company loaned $84,100 to Michael E. McGinnis,
a director and executive officer of the Company, for the purpose of purchasing
Common Shares of the Company in the open market. The loan increased his
indebtedness to the Company to $630,057. The loan was to mature on May 7, 1998,
and the maturity was extended to May 31, 2001, bearing interest at the rate of
10.0% per annum. The outstanding balance of the loan, including interest, as of
November 30, 1999 was $724,659.14.

         In May 1997, the Company loaned $305,000 at 8.5% interest per annum to
David L. Norris, former executive officer, for the purchase of a home in
connection with his relocation to the Company's headquarters in Houston, Texas.
The loan was to mature in May 1998 and was extended to February 1, 2003, and is
unsecured. The outstanding balance of the loan, including interest, as of
November 30, 1999 was $326,017.81.

                                       61

<PAGE>   62
         In September 1998, the Company loaned $100,000 to Besim Halef, an
executive officer, repayable over three years, together with interest at the
rate of 6% per annum. The outstanding balance of the loan, including interest,
as of November 30, 1999 was $107,486.30.

                                       62
<PAGE>   63


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) FINANCIAL STATEMENTS:

The following audited Consolidated Financial Statements of American Eco
Corporation and subsidiaries are included in Item 8:

         Report of Independent Auditors

         Consolidated Balance Sheet as of November 30, 1999 and 1998

         Consolidated Statement of Operations for the years ended November 30,
         1999, 1998 and 1997

         Consolidated Statement of Shareholders' Equity for the years ended
         November 30, 1999, 1998 and 1997

         Consolidated Statement of Changes in Financial Position for the years
         ended November 30, 1999, 1998 and 1997

         Notes to Consolidated Financial Statements

The following consolidated financial statement schedules of American Eco
Corporation and subsidiaries are included in Item 14(d):

         All schedules to the Consolidated Financial Statements required by
         Article 7 of Regulation S-X are not required under related instructions
         or are not applicable and, therefore, have been omitted.

(b) REPORTS ON FORM 8-K

The Company did not file a report on Form 8-K during the fourth quarter of
fiscal 1999.

(c) EXHIBITS

3.1.1    Letters Patent (Certificate of Incorporation) filed February 6, 1969
         (incorporated by reference to Exhibit 3.1.1 to the Company registration
         statement on Form 10, dated September 19, 1990 [the "Form 10"]).

3.1.2    Supplementary Letters Patent, dated June 26, 1970 (incorporated by
         reference to Exhibit 3.1.2 to the Form 10).

3.1.3    Articles of Amendment, filed June 16, 1975 (incorporated by reference
         to Exhibit 3.1.3 to the Form 10).

3.1.4    Articles of Amendment, filed June 23, 1978 (incorporated by reference
         to Exhibit 3.1.4 to the Form 10).

3.1.5    Articles of Amendment, filed June 20, 1986 (incorporated by reference
         to Exhibit 3.1.5 to the Form 10).

3.1.6    Articles of Amendment, filed June 17, 1987 (incorporated by reference
         to Exhibit 3.1.6 to the Form 10).

3.1.7    Articles of Amendment, certified on November 19, 1993 (incorporated by
         reference 3.1.7 to the Company's Form 10-K for the fiscal year ended
         November 30, 1996 [the "1996 Form 10-K"]).

3.1.8    Articles of Amendment, certified on May 27, 1997 (incorporated by
         reference to Exhibit 3.1 to the Company's Form 10-Q for the quarter
         ended May 31, 1997 [the "May 1997 Form 10-Q"]).

3.2.1    By-Laws (incorporated by reference to Exhibit 3.2 to the Form 10.).

3.2.2    By-Law Number 10 (incorporated by reference to Exhibit 3.2.2 to the
         1996 Form 10-K).

3.3      Rights Agreement, dated as of April 1998, between the Company and The
         CIBC Mellon Trust Company (incorporated by reference to Exhibit 4 to
         the Company's Form 8-K for an event of April 9, 1998.)

                                       63

<PAGE>   64


4.1      Share Option Plan (incorporated by reference to Exhibit to Management
         Information Circular to the Company's Form 6-K, dated September 27,
         1995).

4.2      Indenture, dated as of May 14, 1998, among the Company, the Guarantors
         named therein and State Street Bank and Trust Company, as Trustee
         (incorporated by reference to Exhibit 4.1 to the Company's Form 4.1 for
         an event of May 21, 1998).

4.3      Form of Common Stock Purchase Warrant expiring May 29, 2002
         (incorporated by reference to Exhibit 4.5 to the May 1997 Form 10-Q).

*10.1    Agreement, dated as of May 1, 1999 among the Company, Windrush
         Corporation, and J.C. Pennie.

10.2     Agreement and Plan of Merger dated as of April 26, 1996, among the
         Company SRS Acquisition Corporation and Separation and Recovery
         Systems, Inc. ("SRS") (incorporated by reference to Exhibit 10.4.1 to
         the 1996 Form 10-K).

10.3     Acquisition Agreement, dated as of May 31, 1996, between the Company
         and United Eco Systems, Inc. (incorporated by reference to Exhibit 10.5
         to the 1996 Form 10-K).

10.4.1   Agreement, dated April 9, 1996 between the Company and Wayne E. Shaw,
         and as amended on April 17, 1996, April 18, 1996, May 23, 1996 and June
         12, 1996 (incorporated by reference to Exhibit 1 to the Company's
         Registration Statement on Form F-8).

10.4.2   Arrangement Agreement, dated November 13, 1996, among Industra Service
         Corporation, 519742 B.C. Ltd. and the Company (incorporated by
         reference to Exhibit 10.8.2 to the 1996 Form 10-K).

10.4.3   Agreement and Plan of Merger, dated as of September 10, 1996, among the
         Company, Sub Acquisition Corp. and Chempower, Inc. ("Chempower")
         (incorporated by reference to Exhibit 10.9.1 to the 1996 Form 10-K).

10.5     Acquisition Agreement, dated as of August 31, 1997, between the Company
         and Eurostar Interests Ltd. (incorporated by reference to Exhibit 10.1
         to the Company's Form 10-Q for the quarter ended August 31, 1997).

10.6     Acquisition Agreement, dated as of September 1, 1997, between the
         Company and Jones Partners, Ltd. (incorporated by reference to Exhibit
         10.15 to the Company's Form 10-K for the fiscal year ended November 30,
         1997).

10.7     Lease, dated as of August 15, 1996, between 11011 Jones Road Joint
         Venture Group and the Company (incorporated by reference to Exhibit
         10.11 to the 1996 Form 10-K).

*10.8    Employment Agreement, dated May 1, 1999, between the Company and
         Michael E. McGinnis.

*10.9    Employment Agreement, effective as of June 1, 1999, between the Company
         and Michael Appling Jr.

*10.10   Employment Agreement, effective as of May 1, 1999, between the Company
         and Matthew D. Hill.

10.11.1  Credit Agreement, dated as of May 7, 19999, among the Company, the
         other borrowers and General Electric Credit Corporation ("GECC")
         (incorporated by reference to Exhibit 10.1.1 to the Company's Form 8-K
         for an event of May 7, 1999 (the "May 1999 Form 8-K")).

10.11.2  Revolving Note, dated may 7, 1999, issued by AEC Funding Corp.
         (incorporated by reference to Exhibit 10.2.1 to the May 1999 Form 8-K).

10.11.3  Revolving Note, dated May 7, 1999, issued by certain borrowers
         (incorporated by reference to Exhibit 10.2.2 to the May 1999 Form 8-K).

10.11.4  Security Agreement, dated as of May 7, 1999, among the Company, certain
         US subsidiaries and GECC (incorporated by reference to Exhibit 10.3 to
         the May 1999 Form 8-K).

                                       64


<PAGE>   65


10.11.5  Security Agreement, dated as of May 7, 1999, among the Company, certain
         Canadian subsidiaries and GECC (incorporated by reference to Exhibit
         10.4 to the May 1999 Form 8-K).

10.11.6  Guaranty, dated as of May 7, 1999, among the Company and GECC,
         (incorporated by reference to Exhibit 10.5 to the May 1999 Form 8-K).

*        21. Subsidiaries of the Company.

*        27. Financial Data Schedule.

*Filed herewith

(d) FINANCIAL STATEMENT SCHEDULES

The financial statement schedules required by Regulation S-K are incorporated by
reference to Item 14(a).

                                       65

<PAGE>   66


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                    AMERICAN ECO CORPORATION


Dated: March 6, 2000                By: /s/ Michael E. McGinnis
                                        ----------------------------------------
                                        Michael E. McGinnis, President and Chief
                                        Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
             Signature                                   Title                                    Date
             ---------                                   -----                                    ----

<S>                                      <C>                                                 <C>
/s/ J.C. Pennie
-----------------------------------
J.C. Pennie                              Chairman of the Board of Directors                  March 6, 2000

/s/ Michael E. McGinnis
-----------------------------------
Michael E. McGinnis                      President, Chief Executive Officer and Director     March 6, 2000
                                         (Principal Executive Officer)

/s/ Michael Appling Jr.
-----------------------------------
Michael Appling Jr.                      Chief Financial Officer and Vice President          March 6, 2000

/s/ Barry Cracower
-----------------------------------
Barry Cracower                           Director                                            March 6, 2000

/s/ William A. Dimma
-----------------------------------
William A. Dimma                         Director                                            March 6, 2000

/s/ Honorable Donald R. Getty
-----------------------------------
Honorable Donald R. Getty                Director                                            March 6, 2000
</TABLE>


                                       66
<PAGE>   67


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit Number                      Document
--------------                      --------

<S>                     <C>
    *10.1               Agreement, dated as of May 1, 1999, between the Company and Windrush Corporation and J. C.
                        Pennie.

    *10.8               Employment Agreement, dated May 1, 1999, between the Company and Michael E. McGinnis.

    *10.9               Employment Agreement, effective as of June 1, 1999, between the Company and Michael Appling
                        Jr.

    *10.10              Employment Agreement, effective as of May 1, 1999, between the Company and Matthew D. Hill.

    *21.                Subsidiaries of the Company.

    *27.                Financial Data Schedule.
</TABLE>

*Filed herewith


                                       67